Employers: Ask an Expert about Settlements

By Joanne O’Connell

Q: The ACAS guidance suggests an employer should give an employee 10 calendar days to consider the settlement agreement. What risks would we have if we only gave the employee one day to accept our offer?

Julie Taylor, associate solicitor at Gardner Leader solicitors, answers…

The ACAS guidance expands on the provisions of the statutory ACAS Code of Practice on Settlement Agreements (under s111A of the Employment Rights Act) and sets out points for good practice. The guidance does not have to be referred to by an employment tribunal in deciding a case and failure to follow the recommendations of the Code of Practice itself will not automatically lead to a claim. However, whether an employer complied with the Code will be taken into account by the tribunal.

The main risk associated with ignoring the suggested 10 calendar days is whether it could be considered ‘Improper behaviour,’ and therefore could allow the discussion to be used as evidence before a tribunal in an unfair dismissal claim. This is a significant risk because generally, under the legislation, discussions surrounding the settlement agreement will be confidential and not be admissible as evidence before a tribunal for an unfair dismissal claim. However, if there is any “improper behaviour,” then anything said in pre-termination negotiations regarding the settlement agreement could be presented as evidence.

Equally, if there is an existing employment dispute before the settlement agreement discussions commence and there is any “unambiguous impropriety” (such as fraud, blackmail, violence or discrimination) then the established common law “without prejudice” principle will not apply (this principle is the rule that discussions and offers made to resolve disputes cannot generally be disclosed to courts or tribunal).

While it will, of course, be for a tribunal to determine and clarify what amounts to improper behaviour in each case, the ACAS Code of Practice gives some examples of what would constitute improper behaviour. This includes putting undue pressure on a party and the Code specifically refers to a failure to give reasonable time for the offer to be considered as an example of undue pressure.

Therefore, if you insist that an agreement is reached within one day, you run the risk that the employee could argue this is undue pressure and rely on the conversation as evidence to support an unfair dismissal claim.

From a practical perspective, an employee is likely to feel very pressured and stressed by such a short-time frame and this in itself is likely to have a detrimental impact on agreeing the terms. The employee is more likely to resist and look to negotiate a higher settlement pay out. Furthermore, as the agreement is only legally binding if the employee has independent legal advice, it is likely that the employee will want to take advice before confirming their acceptance of a settlement agreement offer. They may not be able to talk to their adviser within this timescale, which could also hamper a swift and amicable resolution.

 If such a short time frame is being considered by an employer, I would suggest that the reason for requiring this is considered and balanced against the risks highlighted above. In most cases it will be appropriate to adhere to around the 10 calendar days’ recommendation and this should assist with reaching an amicable resolution.

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Answer dated 3 September 2014.

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.

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