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ACAS publishes its Code of Practice on settlement agreements

I have previously blogged on the introduction of settlement agreements. In summary, 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 employee rejects the offer, and lodges an unfair dismissal claim, the fact that the employer made the offer cannot be relied on as evidence during the tribunal proceedings, except where there has been ‘improper behaviour’.

Settlement agreements are expected to be introduced in the summer and ACAS has now produced its statutory Code of Practice. It contains a number of important differences from the draft version, including:-

  • omitting the requirement that the initial settlement offer must be in writing (although the agreement itself needs to be in writing);
  • requiring employees to be given a minimum of 10 calendar days to consider any offer (the draft had specified 7 days);
  • adding an expectation that employees should be allowed to be accompanied at settlement meetings (although this will not be a legal requirement).

The government believes that, where both parties recognise that it is beneficial to do so, settlement agreements will make it easier and quicker to end the employment relationship. However, the protection only relates to unfair dismissal claims and not to discrimination or breach of contract claims. This would mean that if an employee brought both a discrimination and unfair dismissal claim after being told, for example, “you are too old to continue working here, we would like you to consider this settlement agreement“, the offer could be relied on as evidence in the age discrimination claim (unless properly made on a ‘without prejudice’ basis which requires a pre-existing dispute) but not in the unfair dismissal claim.

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