Settlement agreements

Coming into force on 29 July 2013

Compromise agreements will be renamed ‘settlement agreements’ and the Government announced that the legislation would make it easier for employers to use settlement agreements. This would be achieved by ensuring that employers can offer settlement agreements before a formal dispute arises without the offer being used as evidence in an unfair dismissal case. An employee can reject the offer and go to a tribunal with their employment rights unaffected.

An amendment to the Act made in June 2012 contained a proposed wording on settlement offers. Subject to exceptions, an offer made or discussion held with an employee with a view to terminating employment cannot be taken into account in unfair dismissal proceedings. However if something ‘improper’ comes up in the discussion, an employment tribunal would be allowed to take it into account. The rule would not apply to complaints of automatically unfair dismissal.

The proposed wording would insert a new section 111A into the Employment Rights Act 1996.

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