July 25, 2013

In addition to the reduction of the unfair dismissal compensation cap and the introduction of the new tribunal fees system, the new rules on pre-termination severance negotiations are due to take effect on 29 July 2013.   In simple terms, they permit employers and employees to hold severance discussions which cannot be used against either party in a subsequent unfair dismissal claim. Until now, employers who wanted to protect their position have had the option to hold severance discussions on a “without prejudice” basis.  But that is often problematic because it can be difficult to argue that the without prejudice rule applies to pre-termination negotiations.  The basic idea of the new rules is therefore to give employers greater confidence that they can initiate severance negotiations without running the risk that the fact they have raised the question of severance will be used against them if they fail to reach an agreement.   In order to help employers understand the new rules, ACAS has published a Code of Practice on Settlement Agreements (see link below). This might sound like good news but, as always, the devil is in the detail.  It’s important to remember that there are some exceptions to the rule.  In particular, the protection may not apply if the employer engages in “improper behaviour” when conducting pre-termination negotiations.  The ACAS Code indicates that improper behaviour will include putting “undue pressure” on the employee by, for example, telling them that they will be dismissed if the settlement proposal is rejected or by not allowing them reasonable time in which to consider the draft settlement agreement. The ACAS Code indicates that parties “may find it helpful” to discuss severance proposals face-to-face and that it would be good practice to offer the employee the opportunity to be accompanied to any such meeting by a colleague or trade union representative.  Slightly surprisingly, it also suggests that employees should normally be allowed at least 10 calendar days in which to consider and take advice on any settlement agreement. This does not necessarily mean that it will now always be necessary to give employees the right to be accompanied to severance discussion meetings and at least 10 days in which to take advice.  But the risk of not doing so is that it may mean that the employee will argue that the employer is guilty of “improper behaviour” and therefore cannot claim that the severance discussions are confidential.  This may not be a problem, but it should at least be considered before embarking on severance negotiations. Here’s a link to the ACAS Code of Practice – http://www.acas.org.uk/media/pdf/j/8/Acas-Code-of-Practice-on-Settlement-Agreements.pdf For further information please contact Marcus Rowland: marcus.rowland@wiggin.co.uk