Guidance Settlement Agreements - Acas

1 Guidance Settlement Agreements December 2018 Settlement Agreements 2 About Acas What we do Acas provides information, advice, training, conciliation and other services for employers and employees to help prevent or resolve workplace problems. Go to for more details. Must and should Throughout this guide the word should is used to indicate what Acas considers to be good employment practice, rather than legal requirements. The word must is used to indicate where something is a legal requirement. December 2018 Information in this guide has been revised up to the date of publication. For more information, go to the Acas website at Legal information is provided for Guidance only and should not be regarded as an authoritative statement of the law, which can only be made by reference to the particular circumstances which apply.

2 It may, therefore, be wise to seek legal advice. Settlement Agreements 3 Contents About this guide .. 5 What are Settlement Agreements ? .. 5 Who can enter into Settlement Agreements ? .. 6 When might Settlement Agreements be used? .. 6 How do you make a Settlement offer? .. 10 Template letters .. 10 What should be covered in a Settlement offer? .. 10 How do you discuss and negotiate Settlement offers? .. 11 The time you need .. 12 The process that works best .. 12 The people involved .. 13 The sensitivity of the issues being discussed .. 14 Payment arrangements .. 14 How to end the employment relationship .. 15 The formal written agreement .. 16 Legal requirements involved in drawing up a Settlement agreement .

3 16 Confidentiality clauses in Settlement Agreements .. 18 The admissibility of Settlement agreement negotiations in employment tribunals and courts .. 18 What does without prejudice mean? .. 19 What are the admissibility provisions of section 111A of the Employment Rights Act 1996? .. 20 How does apply alongside the without prejudice principle in unfair dismissal cases? .. 28 How does apply in cases involving multiple types of claim?.. 29 Discrimination and victimisation and the use of Settlement Agreements .. 30 Settlement Agreements and collective redundancies .. 32 What if a Settlement agreement is not reached? .. 33 What happens if a Settlement agreement is not honoured?

4 34 Settlement Agreements 4 Annex 1: Checklist for employers proposing a Settlement agreement .. 35 Annex 2: Checklist for employees who have been offered a Settlement agreement .. 37 Annex 3: Optional template letter to initiate Settlement discussions (where there has been no previous performance management or disciplinary action) .. 39 Annex 4: Optional template letter to initiate Settlement discussions (where there has been previous or there is ongoing performance management or disciplinary action) .. 41 Annex 5: Model Settlement agreement .. 43 Guidance on using the model agreement .. 43 Model Settlement agreement .. 51 Annex 6: An illustration of the admissibility of Settlement agreement negotiations in unfair dismissal cases.

5 65 Settlement Agreements 5 About this guide Employment relations concerns can arise in most workplaces employers may be unhappy with an employee s performance or their behaviour whilst employees may feel discontented about the way they are being treated or the work they are being asked to do. Problems in the workplace are usually best resolved in open conversations, including, as appropriate, through the use of performance management, informal and formal disciplinary or grievance procedures, workplace mediation or Acas conciliation. However, Settlement Agreements are also a tool that can be used to deal with workplace problems. Most commonly they are used to help end an employment relationship in a mutually acceptable way.

6 This guide, which has been considered and approved by the Acas Council, is designed to help employers and employees understand what Settlement Agreements are, what their effect is, when they might best be used and how they can be negotiated. Although Settlement Agreements can be proposed by employers or employees they are usually proposed by employers and this Guidance is focused accordingly. Nevertheless, the Guidance will also be helpful to employees who have been offered a Settlement agreement or where employees are themselves considering proposing Settlement . Employees considering these options may wish to seek further advice. This is available from a number of sources including the Acas Helpline, their trade union, their local Citizen s Advice bureau, or an employment lawyer.

7 This guide focuses, in part, on explaining the law relating to the use of Settlement agreement offers and discussions as evidence in unfair dismissal claims before employment tribunals, as regulated by section 111A of the Employment Rights Act 1996. It also provides Guidance on Settlement Agreements more broadly. The guide sets out good practice and has no formal status in employment tribunal proceedings. It should therefore be used in conjunction with the Acas statutory Code of Practice Settlement Agreements (under section 111A of the Employment Rights Act 1996). The Code is taken into account by employment tribunals when considering relevant cases. What are Settlement Agreements ?

8 Settlement Agreements , formerly known as compromise Agreements , are documents which set out the terms and conditions agreed by those involved (the two parties) when they agree to settle a potential employment tribunal claim or claims or other court proceedings. Settlement Agreements 6 Who can enter into Settlement Agreements ? Normally it is an employer and employee (or former employee) who are the contracting parties to a Settlement agreement . They can also be agreed between an employer and someone other than an employee (or former employee) who may be able to bring a claim to an employment tribunal for instance, a worker who has a complaint about holiday pay, or an unsuccessful job applicant who feels they were discriminated against at a job interview.

9 An individual Settlement agreement will be signed by two parties and cannot be signed by groups of individuals. Box 1: Key features of Settlement Agreements They are legally binding They can waive an individual s rights to bring a claim covered by the agreement for example, the right to make a claim to an employment tribunal or court The employee (or former employee) usually receives some form of financial payment and will also often receive a reference as part of the agreed terms They are entirely voluntary they include terms and conditions that are mutually agreed, and parties do not have to enter into them if they do not wish to do so They are often reached through a process of discussion and negotiation.

10 The parties do not have to accept the terms initially offered there may be a process of negotiation during which both sides make offers and counter offers Negotiations about Settlement Agreements are often confidential in the sense that, if an agreement is not reached, the negotiations may not be admissible as evidence in claims before an employment tribunal or in other court proceedings. When might Settlement Agreements be used? Settlement Agreements are normally used to bring an employment relationship to an end in a mutually agreed way. They are often used in situations where an employer and employee feel that their employment relationship is no longer working and a clean break is the best way forward.