During the second reading of the Enterprise and Regulatory Reform Bill on 11 June Vince Cable announced that the Government wants to promote and increase the use of agreements relating to the termination of employment as an alternative to employment tribunal proceedings. No details were provided but the intention is to "ensure that the offer of a settlement cannot be used against an employer in an unfair dismissal case". But, hang on, isn’t that what a compromise agreement under the current legislation does and are these new settlement agreements going to be confined to unfair dismissal claims?
It has been suggested that, for small employers, there will be no need to obtain legal advice. But small employers do not need legal advice as matters stand: it is employees who must obtain advice in order for an agreement to be binding. Clearly, employees might not know whether a proposed settlement is fair and reasonable given the circumstances and the requirement to obtain legal advice is intended to address this understandable lack of knowledge. However, the Government has suggested that employees will continue to enjoy full employment protection because they can reject a settlement offer and proceed to an employment tribunal. That does not answer the question whether an employee can make an informed decision about whether or not to accept an offer in settlement.
One undoubtedly positive development is that the proposed legislation intends to remove the restriction on settlements to those situations in which there is an existing dispute. It is well known that many current settlements refer to a dispute which, in reality, is nebulous if it exists at all.
A more problematic aspect concerns what will happen if an offer is rejected. As pointed out by Shadow Business Secretary (and former employment lawyer) Chuka Umunna it is difficult to imagine that the required mutual relationship of trust and confidence would survive an employee being given an offer of a severance payment, even if the process was conducted on a without prejudice basis.
Another area of concern is that the "protected conversations", i.e. without prejudice discussions which might lead to such settlements will not be protected if something "improper" arises in the course of the discussion. So what might be considered "improper" in this context and, perhaps more importantly, who will make that decision? Presumably the matter would be referred to an employment judge who would have to know all about the supposedly protected conversation before deciding whether or not any part or parts of it might be regarded as improper. And what is a necessary part of that exercise? A hearing at which lawyers could have a field day arguing about what is, or is not, improper.
We have been told to expect sample agreements and other template documents in the coming months. No doubt these will generate a great deal of analysis and discussion and we will, of course, keep you right up to speed about this important area of employment law.