You know that there is something seriously amiss with employment relations in the UK when Acas’ new Guidance on settlement agreements has to run to 83 pages. This is of course on top of its Code of Practice which contains another 11. So that is close to 100 pages dedicated essentially to how to agree something with an employee and then write it down.
The complicating factor here is of course the coming into force this week of Section 111A Employment Rights Act 1996, the “protected conversations” concept, i.e. the ability to offer an employee money to go away without his being able to use that approach against you if he refuses it. We have posted on this idea a number of times before, none of them very positively. Sad to report that there is nothing in the new Acas Guidance which addresses its basic shortcomings – that the conditions attached to the protection of such an approach are too limiting and unclear and that the risks of not benefiting from that protection are too high.
The Guidance sets out good practice only and has no formal status in Employment Tribunal proceedings, whereas the Code can be taken into account in that forum. So what do those 83 pages add? Some selected highlights:
- Employers should be careful not to rely on settlement agreements as a substitute for good performance management (but it is entirely lawful to do so);
- The offer can be oral or written but in either case should be accompanied by an explanation of why it is being made, this in sufficient detail to allow the employee to make an informed decision about his options. In reality you would almost always be better off putting offers in writing;
- The Guidance contains templates for offer letters and a settlement agreement, but use of these is not compulsory;
- A minimum consideration period of 10 calendar days must be given to the employee. Anything less risks blowing the protection which the offer would otherwise have from disclosure in the Tribunal;
- It is good practice (but not a legal obligation) to allow the employee to be accompanied at any meeting held to make or discuss a severance offer;
- “If the settlement discussions are conducting in a sensitive manner, including listening to concerns and providing informative answers to questions, there is a greater chance of reaching a mutually acceptable outcome“. Equally it might be said that if you are prepared to discuss issues with your employees in that way, you will probably not need these severance offers in the first place;
- An explanation of the differences between the pre-existing without prejudice concept and the new “admissibility provisions” under s.111A – in broad terms, without prejudice protection requires an offer to be a genuine attempt to resolve an existing dispute, whereas the s.111A offer can come “out of the blue”. As a way of subsequently generating a dispute this has few equals, but the s.111A protection then makes this much harder for the employee to pursue;
- The protected conversations regime will not prevent offers made being disclosed in claims of automatic unfair dismissal, discrimination or whistleblowing, i.e. all the circumstances where the employer is perhaps most likely to want a quick and discreet resolution;
- Similarly, where the employer is guilty of “improper behaviour” around the offer, that protection may be lost. Extensive lobbying of Government at the drafting stage sadly failed to procure any statutory definition of this. The Guidance refers to “putting undue pressure on a party” as an example of improper behaviour. Although its few examples are miles away from giving employers a useful picture of what this might cover, it does assert also that “the test of improper behaviour is not intended to interfere with existing and acceptable negotiating practices“.
That does not seem much content for your 83 pages. However, the template settlement agreement accounts for 17 of them, and the drafting notes for it another 9, and they contain nothing which need trouble any employer or employee with past experience of compromise agreements.