ACAS Publishes ‘A Guide: Settlement Agreements’.


Published: 1 August 2013 

On 30 July ACAS published ‘A Guide: Settlement Agreements’ to accompany it’s Code of Practice on Settlement Agreements. The changes to the law introducing settlement agreements and pre-termination negotiations (also called protected conversations) came in on 29 July 2013.

We asked four specialist employment lawyers for their thoughts on the guide and changes.

Charles Millett, Partner at Morecrofts LLP:

 “ If it was the Government’s intention to simplify the process of employers and employees reaching settlements, it is somewhat ironic that the Acas Guide stretches to over 80 pages!  Admittedly some of this contains the template agreements and letters that employers may wish to use, but it is certainly a hefty document. “

 Whilst the Guide will undoubtedly be helpful, we envisage that there will still be traps for the unwary employer and employee alike.  Employers may find that conversations they thought were “off the record” are in fact admissible as evidence in tribunal claims after all.  Employees may find they are coerced by economic pressure into agreeing deals that they might regret with hindsight months later. “

Michael Scutt –  Employment Solicitor at Excello Law

The ACAS guide is to be welcomed because it sets out the background to settlement agreements and pre-termination discussions. It is not mandatory but will undoubtedly be referred to and relied on by both parties in employment tribunal litigation and will have persuasive value. It is not a quick read and non lawyers may find it rather intimidating. It does contain some useful checklists, model letters and a template of a settlement agreement.

There is certainly a need  for guidance in this area because satellite litigation on whether an employer or employee acted improperly in offering a settlement agreement will inevitably arise and it will be some time before the law is clear on what is or is not acceptable behaviour. Employers, in particular,need to proceed with caution when making these approaches to employees.

Catherine Wilson, Partner at Thomas Eggar LLP

“The ACAS guide is to be welcomed.   Not only does it acknowledge the need for “adult to adult” conversations in the workplace it confirms that settlement agreements form a useful  part of this dialogue.  

Very helpfully it also provides useful examples of workplace scenarios, checklists and even draft template offer letters, agreements and related documentation.

Settlement agreements like their predecessor compromise agreements are however deceptively simple and can cause significant problems particularly for the unwary employer user.  

Recent legal changes extend protection to certain “off the record” type discussions. Pre-termination settlement negotiations can however still be used as evidence in certain unfair dismissal proceedings. If, for example, the employee alleges dismissal by way of whistle blowing or involvement in trade union activities.  Such conversations may also be disclosable if the employer is found guilty of  “improper  behaviour”. This is widely defined and could include an employer placing undue pressure on an employer including the imposition of a deadline for acceptance of less than 10 days. Employers also need to be aware of the impact of any failed settlement negotiations on the future employment relationships.

Finally it is important to note that the Guide is “only” advisory and not mandatory.  This is in contrast to the ACAS Statutory code of Practice on Settlement Agreements which must be taken into account by tribunals when deciding claims. ”  

Jemma Pugh, solicitor at Lester Aldridge:

 “The ACAS guidance on settlement agreements provides a useful overview to both employers and employees of the relevant provisions, together with checklists for both parties and template letters for employers to use.

The majority of employers will find that they are quite familiar with settlement agreements already because they will have used them in their previous form as ‘compromise agreements’. The purpose and effect of a settlement agreement remains exactly the same as a compromise agreement; an employee waives their right to make a claim against their employer in return for a sum of money.

The main change which employers should be aware of is that they will be able to engage in confidential pre-termination discussions with employees regarding the termination of their employment, even where there is no existing dispute between the parties. This means that employees cannot then refer to these discussions as evidence in any Tribunal claim for unfair dismissal (unless there has been improper conduct). Previously, the ‘without prejudice’ rule would not cover such situations so this extends the scope of confidentiality. ACAS have included information about this within their guidance on settlement agreements and also issued a separate Code of Practice on Settlement Agreements which will be helpful for employers”. 

IMPORTANT: The contents of this page are for guidance only and do not constitute legal advice. You should consult a solicitor without delay if you require legal advice on a particular employment matter.