HR Alert: Key changes to Compromise Agreement

PRACTICES should be aware of a number of employment law changes brought into force on July 29 of this year, including the Compromise Agreement being renamed the Settlement Agreement.

PRACTICES should be aware of a number of employment law changes brought into force on July 29 of this year, including the Compromise Agreement being renamed the Settlement Agreement.

Compromise agreements have been an option for employers looking to part ways with an unsatisfactory employee, but they have always been advised to be used with caution as, if handled the wrong way, employers could face a constructive dismissal claim.

Under a Settlement Agreement, employers and employees will be able to enter into such discussions which will now be inadmissible in an ordinary unfair dismissal claim (pending certain conditions). It is similar to the previous ‘without prejudice’ rule but there are some differences.

The government has recognised that there may be times when either the employer or the employee wants to enter into a pre-termination discussion, even where there is no current dispute. The concept of such ‘confidential’ discussions has been introduced with the intention of encouraging both employers and employees to enter into a settlement agreement.

However, employers should only hold pre-termination discussions with employees when there is a straightforward unfair dismissal claim.

The new Settlement Agreement guidance is slightly convoluted but ACAS has published a booklet detailing the new arrangements and includes template letters and agreements.

The ACAS guide can be found here.

This area still remains a contentious one in the world of employment law so it is advisable to seek legal guidance before commencing in such discussions.

Details of further employment law changes can be found within this Employment law update.