Relations between employer and employee can become problematic for many reasons and these issues are usually best resolved through straightforward and honest conversations.  However, settlement agreements (formally known as Compromise Agreements) are another tool which can be used to deal with workplace issues, and are commonly used to help end an employment relationship in a way which is acceptable to both parties or to reach an agreed and final conclusion to a workplace dispute or issue which does not result in an Employment Tribunal.

There are a number of areas an employer should consider before using settlement agreements, such as:

Is a settlement agreement the best way to deal with the issue? Use of this process should not take the place of good management.

How will you approach the admissibility provisions with your employee? You are required to inform your employee that the “without prejudice” principle and the admissibility provisions as set out in the Employment Rights Act 1996 prevents the conversation from being put before an employment tribunal or court, providing certain criteria are met.

Are you going to ask the employee if they would like to be accompanied at any such meeting? Accompaniment is not a legal requirement for settlement discussions, but ACAS consider it to be best practice.

Is it clear that there is no unlawful discrimination or victimisation involved in offering a settlement agreement in the circumstances? Settlement conversations which have arisen because of a dispute which is discriminatory or which end up including issues of discrimination will not be given the protection of the “without prejudice” principle and may end up being heard at tribunal or court.

Are you aware of all the legal requirements for a settlement agreement to be valid? All of the following conditions must be met:

• The agreement must be in writing

• The agreement must relate to a particular complaint or proceedings

• The employee must have received advice from a relevant independent adviser on the terms and effect of the proposed agreement and its effect on the employee’s ability to pursue that complaint or proceedings before an employment tribunal or other court

• The independent adviser must have a current contract of insurance or professional indemnity insurance covering the risk of a claim by the employee in respect of loss arising from that advice

• The agreement must identify the adviser

• The agreement must state that the statutory provisions which set out the above conditions regulating the validity of the settlement agreement have been satisfied

Have you considered what might be a realistic and reasonable timescale for any discussions and negotiations? Employees should be given a minimum of ten days to consider the written settlement offer and each case should be considered on its own merits. Solve can draft the settlement agreement for you, support you through the process and support with negotiations. Please contact Solve for support on 0131 300 0433.