Business Secretary Vince Cable has announced that the Government will allow employers to use settlement agreements (otherwise known as compromise agreements, but soon to be re-named) in a wider range of circumstances without legal risk – or at least that is the theory.
In his opening speech at the second reading of the Enterprise and Regulatory Reform Bill, the Business Secretary said that under the proposals employers will be able to offer settlement agreements to employees before a formal dispute arises and will be legally protected from such offers then being used against them in any subsequent unfair dismissal claim. Apparently the sort of situation he has in mind is where an employee is underperforming and his employer does not wish to follow a formal (and possibly lengthy) procedure, although interestingly in the press release that accompanied the proposals the Employment Relations Minister Norman Lamb suggested that it could cover a wide range of situations “such as where an employee isn’t pulling their weight or where someone is unreliable or even guilty of misconduct”! It had earlier been suggested that something similar could apply where the employer wanted older employees to retire, though that seems off the agenda for the time being.
So, what’s new? It’s true that many employers already use compromise agreements in such circumstances, but as the law currently stands this route can be risky, as unless there is a genuine dispute between the parties (i.e. the employer has already taken some steps to manage/discipline the employee) the employee could resign and claim constructive dismissal and/or use the discussion as evidence in subsequent Tribunal proceedings. The Government’s aim is to take away this uncertainty and make it easier for employers to end an employment relationship quickly.
In theory these proposals are good news for employers, although there are concerns that they could simply result in satellite litigation – anyone remember the Statutory Dispute Resolution Procedures?
The devil is clearly going to be in the detail and a formal consultation will take place in the summer, including draft letters and model templates for employers to use.