settlement agreements
TRANSCRIPT
SETTLEMENT AGREEMENTS
On Monday the Government announced plans for “Settlement Agreements” under the proposed legislation to be contained in the Enterprise and Regulatory Reform Bill.
The aim of these agreements is to enable employers to encourage employees to leave in return for an agreed pay-off. They are designed to make it easier for employers to address workplace disputes. Settlement Agreements are meant to be a simplified version of compromise agreements already in use and the Government hopes that their introduction will encourage more employers particularly smaller ones to use them before formal disputes arise.
These agreements will allow employers to make an offer to leave without fear of the offer being raised in a tribunal claim. There will not be a need for an existing dispute to be in place (which currently is a requirement when negotiating compromise agreements) and the Government will also publish a standard ‘settlement agreement’ form for the employer and employee to use.
There is however a level of scepticism by some legal commentators as to whether the proposals actually make any significant changes to the current compromise agreement regime. It is thought by some that this is little more than a name change. Whether this is the case remains to be seen and in particular there are outstanding issues which need to be addressed, for example will the obligations actually be different to that of compromise agreements in particular the requirement for legal advice to be provided to the employee. There is also a concern as to whether there is protection from potential abuse of the process by unscrupulous employers who could put pressure on an employee to sign away their employment rights. We understand a consultation on the guidance for use of settlement agreements will be published in the summer.
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