The main proposal is to include in the Enterprise and Regulatory Reform Bill a provision that would allow employers and employees to hold settlement discussions without fear that these could be then used against them in the tribunal. The idea is that this would make it easier and quicker for parties to sort out situations where the employment relationship is not working out. This is different from the "without prejudice" rule, where there must be a pre-existing dispute and the discussions are a genuine attempt to settle the dispute, in which case the discussions and associated correspondence cannot be put before a court or tribunal.
The new statutory regime does not require a pre-existing dispute and only applies to potential claims for unfair dismissal – not, for example, discrimination or whistleblowing; and the protection is lost if the behaviour of either party in the discussions is "improper". The intention is that conciliation service ACAS would produce a Statutory Code of Practice on conducting the settlement discussions in line with the new legislation and what might be considered "improper", such as discriminatory behaviour or undue pressure to accept. There are concerns that the vagueness of the concept of 'impropriety' will lead to uncertainty on the part of employers about the usefulness of the procedure. Also, the fact that it only creates protection in unfair dismissal is a considerable limitation, as many employment disputes consist of a bundle of different legal claims.
While this regime is likely to help employers, in that they can enter these sorts of discussions without already being in a dispute – a requirement that has caught many employers out in the past and has meant that tackling these issues too early has left them facing a constructive dismissal claim – employers will need to be cautious in how they approach the new law.
As it only applies to unfair dismissal claims, it can only be useful in the most basic scenarios, not when there could be, for example, ill-health issues which may relate to a disability under the Equality Act 2010 affecting performance or other discrimination issue, which may be at the bottom of an individual not getting on with their manager or not "fitting in".
Employer and employee groups have also raised concerns that this will be seen as a passport to poor performance management, as employers may not be concerned to manage situations in a way consistent with good practice if they believe they have a safe mechanism which can circumvent the need for proper performance management. This could have a damaging effect on the very businesses the change to the law is intending to assist.
Another proposal is to have formula or guideline tariffs for settlement agreements, to avoid employees having unrealistic expectations about what sort of settlement sum they might expect and to give employers an idea of where to pitch any offer. A formula would create problems in practice as it may be seen as a starting point for negotiations and lead to employers paying more to achieve settlements than they do now.
The alternative suggestion for a list of issues, which both sides can take into account, is more workable, although the factors should not be overly complicated. Proposed factors include "the perceived strength of any potential claim" and "the individual's perception of how long it will take to get another job". Both are areas where the employer and employee may not see eye to eye.
The Statutory Code is expected by Government to resolve the uncertainty surrounding the current proposals. But it is unlikely that any code will cure the inherent lack of clarity about the concept of 'improper' conduct, which may take the courts several years to explain fully. The Employment Lawyers Association is one of the stakeholders speaking to ACAS about the content of the proposed Code.
Overall, this may be a worthy attempt to ease the burden on employers, but the draft law requires considerable tweaking if it is to be fit for purpose.
Maeve Vickery (pictured) jointly chaired the Employment Lawyers Association (ELA) working party, which responded to the BIS consultation on "Ending the Employment Relationship". She is a partner and head of commercial and employment at Pardoes Solicitors.