They used to be called “compromise agreements”, but they’ve been known as “settlement agreements” since July 2013 when the concept of confidential pre-termination discussions was also introduced. Sometimes known as “protected conversations”, these discussions are a useful tool in an employer’s kitbag, allowing the employer more leeway to raise matters which would not have previously been protected by the without prejudice rule.
The Acas Code on settlement agreements combined with section 111A of the Employment Rights Act 1996 prohibits “improper behaviour” if the employer wishes to take advantage of the rule preventing an employee referring to a “protected conversation” in unfair dismissal proceedings. Prohibited behaviour includes bullying and intimidation through the use of aggressive behaviour or offensive words, putting undue pressure on a party (such as giving less than ten calendar days to consider an offer) or saying that if a settlement proposal is rejected, the employee will be dismissed.
The wording of any offer should therefore be very carefully drafted so that an employer can retain the protection available. Don’t require a settlement to be completed within, say, seven days, although there is nothing wrong with requiring an employee to give a quick indication of whether they would be willing to consider an offer so that you can then draft a full settlement agreement. An alternative strategy is to enclose a draft settlement agreement with a first offer letter to move matters along.
However, you must also be careful about the actual wording of the settlement agreement. Recently, I’ve come across the same situation several times where employers base an agreement on a previous one which had been drafted for another employee. The risk here is that the first agreement was amended in light of negotiations with the first employee’s solicitor and either contains or omits provisions which are inappropriate for the second employee.
It is also important to ensure that the terms of settlement cover what you were intending. A recent case dealing with COT3 agreement wording found that the wording was not sufficiently tight to prevent the employee from bringing a claim arising from facts other than “the facts of the proceedings up to and including the date [of] this agreement”. If you mean to settle all claims, you need to say so and ensure that any exceptions are limited.
Finally, be aware of the limitations of “protected conversations”. They will not protect you from claims of discrimination and reference to them may be made in such claims. With ordinary unfair dismissal rights not kicking in until two years’ service, an aging workforce and recent tribunal decisions recognising “workers” in the gig economy, more employees and workers are likely to allege discrimination in an attempt to circumvent section 111A.