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Settlement Agreements to exit employees
Help is at hand for businesses to exit difficult employees.
Every business has an employee who no longer ‘fits’. In 2013, the Government introduced Settlement Agreements, opening up a route to allow employers to start confidential termination negotiations with employees without the risk of any discussions being used as evidence in the event of an unfair dismissal claim.
Previously, there had to be an existing dispute before a 'without prejudice' discussion around the termination of an employee’s contract, and the signing of a compromise agreement, could begin. The new legislation means that a settlement agreement can be introduced if the employer or employee wants to agree terms to end their employment. There is no requirement for there to have been any discussions on the subject beforehand.
Like compromise agreements, Settlement Agreements are legally binding. They must be in writing, set out the particular issues to be "settled", have been checked by an independent legal adviser and list the types of claim you wish to prevent your employee from bringing in the future. The employee will usually receive some form of financial payment and a reference.
Guidance from ACAS is to give employees a reasonable period of time to consider any offer - they suggest 10 days. ACAS also suggests that an employee is allowed to bring a work colleague to any settlement agreement meetings. These are not legal requirements, but are best practice suggestions that we would recommend are followed.
Does that mean all termination discussions are protected?
No it doesn’t. Whilst the new approach gives business owners more freedom to open up discussions around termination of employment, the new regulations don’t apply to what are known as automatically unfair dismissals, or if there has been "improper behaviour", such as:
  • Fraud
  • Undue influence - including physical threats or violence
  • Discriminatory or harassing conduct
  • Undue pressure - including not giving sufficient time to consider the offer
  • Some other "ambiguous impropriety", such as perjury or blackmail
What should employers do if you want to exit an employee?
Always consider the alternatives, for example, initiating capability proceedings. If this is not practical, proceed with care. Check any agreement that is to be offered is in the correct form and in line with ACAS guidelines. One size definitely does not always fit all.
Secondly, ensure that settlement meetings, and the offering of settlement agreements, are controlled closely. A "sign it or be sacked" approach will be seen as "improper behaviour".
For more details on settlement agreements, contact us on 07813-994556.

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