Erlier this year, the government set out plans that mean from 29 July 2013 onwards, ‘compromise agreements’ will be renamed ‘settlement agreements’.
Settlement agreements will continue to be legally binding contracts between employers and employees. Their effect is to waive an individual’s right to make claims to a court or an employment tribunal on matters specifically covered in the agreement.
Pre-termination negotiations leading up to the signing of settlement agreements will also be introduced as a new concept on 29 July 2013. Currently, in order for an employer and employee to enter into ‘without prejudice’ discussions regarding a termination settlement, to avoid the content of the discussions being admissible in subsequent proceedings, there must be an existing dispute between the parties, such as an on-going disciplinary matter. Provided that there is a dispute, settlement discussions geared at resolving this dispute will normally be covered by the ‘without prejudice’ rule, making their content inadmissible as evidence in subsequent court or tribunal proceedings.
There will, however, be no requirement for a pre-existing dispute to exist between the parties in order for them to enter into pre-termination negotiations. This means that in theory the parties can initiate such discussions any time they like. It appears that the aim of removing the requirement for a dispute is to facilitate the timing and manner in which settlement discussions can be entered into and to allow employers to have full and frank discussions with employees without the fear of the content of such discussions being used against them in subsequent unfair dismissal proceedings.