Could the introduction of settlement agreements give organisations an easier route to dismissing staff? John Charlton reports.
If proposed legislation goes ahead as planned, it looks as though employers may be waving a cheery goodbye to compromise agreements and a guarded hello to settlement agreements (SAs).
Under the guidance of business secretary Vince Cable, proposals on SAs have been included in the Enterprise and Regulatory Reform Bill (ERRB), which is at the committee stage having had its second reading in June. It looks as though they will replace compromise agreements and give employers access to a structured route to the exit door for employees who are underperforming, minimising, in theory, the risk of unfair dismissal claims.
Gagandeep Prasad, associate at Charles Russell, says that the proposed name change from compromise to settlement "is a way of addressing the perception that there has been any compromise in reaching an agreement", while the Government considers that "settlement agreement is more widely understood".
It is very likely, points out Nikki Duncan, partner at Michelmores, that SAs will largely be appropriate in straightforward cases, for instance underperformance, "where an employer hopes to negotiate a speedy exit package which avoids the management time and delay of going through formal warnings procedure".
Cable says: "The use of settlement agreements is a win-win situation for employers and employees.
"For employers, they will have the certainty that they won't face a tribunal case where an individual agrees to settle, and the offer of a settlement cannot be used as evidence in a case of unfair dismissal. And for workers, they leave with a cash payment, avoiding the time and stress of a tribunal and the possibility of a reference. In addition, employees would know that they are leaving the job with their dignity intact."
Well that's alright then. Except, of course, that in legislation and regulations it is detail and application that matter, and we're still some way off that. Interested parties, such as employers' bodies and trade unions, are making