In my last blog on ERR, I referred to the plan to rename compromise agreements as settlement agreements as being purely cosmetic. Vince Cable’s plans announced this week when ERR had its Second Reading in Parliament suggest there might actually be more substance to it.
This excerpt from the Department for Business Innovation and Skills (BIS) press release announced its plans;
Under these measures, employers will be able to offer settlement agreements before a formal dispute arises and will be legally protected from this offer being used as evidence in an unfair dismissal tribunal case. Employees will also continue to enjoy full protection of their employment rights, as they can choose to reject the offer of a settlement agreement and proceed to a tribunal. Evidence from the private sector shows that a sensible compromise can be reached in the majority of cases.
The Government wants to encourage greater use of settlement agreements and make it easier and quicker for employers – including SMEs – and employees to end the employment relationship by mutual agreement in a way that protects workers rights but helps businesses remain flexible.
The agreements are currently available for employers in some circumstances. However, Government wants to encourage more businesses to use them, including before they have reached the stage of a formal dispute. By making settlement offers and discussions inadmissible in unfair dismissal claims, businesses can be more confident that they will not be used against them at a tribunal.
The reality of the situation now for employees is not so rosy. For instance (and I’ve seen this many times), an employer might say (with or without justification) to an employee, “you have a choice: we think you’re under performing and we’re going to put you on a performance improvement programme (PIP) or you can leave with a compromise agreement” and for good measure “take the compromise agreement and we’ll give you a good reference”, with the unexpressed threat being ”go down the PIP route we’ll sack you and there won’t be any reference”. Many employees under the current rules feel coerced into taking the agreement route although they may (in those circumstances) have a claim for unfair dismissal, because the outcome of the PIP has been predetermined. That is what makes the situation and the subsequent dismissal unfair.
The latest proposals will only exacerbate this problem. It is a diluted form of Protected Conversation and Compensated No Fault Dismissal (CNFD) and will only apply to unfair dismissal. Settlement agreements will be used a lot more widely and most employees will probably take up that option rather than fighting on. The protection that employees have against unfair dismissal will be further significantly eroded. If the employer offers a reasonable cash incentive to leave the unfairness is mitigated to some extent, but that often won’t be the case.
There could also be another problem for employers with this. They run the risk that an aggrieved employee is going to allege that the discussion is admissible in Tribunal because the dismissal was motivated by discriminatory factors. Take this in addition to the recent increase in the qualifying period for unfair dismissal claims to two years and the likelihood is that the number of discrimination claims is likely to rise significantly.