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ACAS Code of Practice on settlement agreements

Yesterday ACAS launched a consultation on its draft code of practice on settlement agreements. The code can be accessed here and the closing date for responses is 9th April.

As part of the Enterprise and Regulatory Reform Bill, the government is proposing to introduce settlement agreements in the summer. Employers will be able to offer to pay an employee compensation for entering into a settlement agreement, either before or after a dispute arises. If the offer is rejected, and an unfair dismissal claim lodged, the fact that the employer made the offer will be inadmissible as evidence during the tribunal proceedings, except where there has been ‘improper behaviour’.

The draft code covers elements of good practice relating to offers and negotiation of settlement agreements. For example, it states that it will be best practice for initial offers of a settlement agreement to be set out in writing; and that employees should have the option to be accompanied by a work colleague or union representative at meetings discussing settlement.

The code provides that employees should be given a reasonable amount of time – at least 7 working days – to consider an offer of a settlement agreement and to receive independent advice.

The confidential status of settlement agreement discussions does not apply if there has been ‘improper behaviour’. The code provides that this would include harassment (intimidation through the use of offensive words or aggressive behaviour); victimisation; discrimination; and putting ‘undue pressure’ on the other party. Undue pressure would cover:

  • an employer not allowing an employee 7 days to consider an offer;
  • an employer reducing the value of the offer during the 7 days;
  • an employer stating that if the offer is not accepted then the employee will be dismissed; and
  • an employee threatening to undermine an organisation’s reputation unless the employer agrees to sign.

The draft code includes non-compulsory template letters. These will be supplemented by a model agreement which will be published as part of non-statutory guidance. The guidance will also address some issues not covered by the code, such as how the confidential status of the offer will work with multiple claims and the interplay between the existing without prejudice rule and the new confidentiality provisions.

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