Cable sees greater role for settlement agreements in resolving work disputes

The Government has unveiled plans for a greater role for ‘settlement agreements’ in resolving workplace disputes between employers and employees.

Under the measures, which were announced by Business Secretary Vince Cable in his opening speech at the second reading of the Enterprise and Regulatory Reform Bill, employers will be able to offer settlement agreements before a formal dispute arises.

However, the agreements – previously known as compromise agreements – will be inadmissible in unfair dismissal claims, which Cable said would give employers confidence that the offers would not be used against them in the courts.

Employees would also continue to enjoy full protection of their employment rights and be able to choose to reject the offer, the Department for Business, Innovation and Skills said.

According to DBIS, the offer from the employer could be in the form of a letter to the employee and include detail on what kind of payment could be expected.

The Government insisted that the agreements should not replace proper performance management, but added that there were situations where it made sense to both parties to end the employment relationship.

If an employee refuses the offer, the employer will still have to follow a fair process before deciding to dismiss them.

DBIS said the new clauses would be tabled in the forthcoming Committee stage for the Bill. Later this summer a consultation will be published on the principles of guidance for using settlement agreements, including draft letters and model templates for employers and employees to use.

On the renaming of the agreements, DBIS claimed that ‘settlement’ more accurately described an agreement that was about delivering a satisfactory solution for both parties.

Cable said: “Settlement agreements are smart, fair and pro-business reforms which deliver results for employees and employers. It empowers employers by enabling them to keep their workforce flexible and encouraging alternative ways of solving workplace problems rather than resorting to a tribunal. But crucially it does so in a way that keeps the necessary protections for employees in place.

“Our proposed measures and guidance will achieve this objective. Making this approach simple to use will encourage employers to take on staff in the knowledge this there is an effective mechanism for dealing with serious problems if they occur.”

Employment Relations Minister Norman Lamb said the Government wanted to ensure that all employers could make use of settlement agreements without incurring large legal fees.