‘Ending the employment relationship’ – Government’s plans

The Government has now published its response to the consultation on ‘Ending the Employment Relationship’. The Government’s objective is to make it easier to end the relationship, and so give employers more confidence to take on new staff. As one of the law firms that submitted a response to the consultation, we have awaited the outcome with interest.

The outcome is as follows:

• Existing ‘compromise agreements’ will be replaced with ‘settlement agreements’. Offers of settlement will be inadmissible in any claim for unfair dismissal – effectively extending the ‘without prejudice’ doctrine to cover situations where no formal dispute has yet arisen;
• The Government will implement a Statutory Code of Practice alongside the legislation. Acas will shortly be undertaking separate consultation on the code itself;
• Guidance will be issued with illustrative examples on the correct way to handle the new settlement approach to avoid ‘improper behaviour’ that could remove the protection. This is in line with our submission that clear, detailed and helpful guidance was needed on this point;
• Settlement offers will be inadmissible in constructive unfair dismissal claims, but will be admissible in a wrongful dismissal claim. Although we raised the issue in our response, it remains unclear how the protection will apply in relation to discrimination or whistleblowing claims forming part of an unfair dismissal claim;
• A template letter broaching settlement will be included in the code, but it will not be made compulsory. A template settlement agreement will also be included in accompanying guidance. We and other respondents raised various issues with both of these, which the Government has acknowledged and which we hope will be resolved in the Acas documentation;
• The Government will not set a guideline tariff for settlement offers, but will instead include guidance on the considerations that both parties should bear in mind during the negotiation; and
• A new limit of the lower of twelve months’ salary and the overall cap on compensation (currently £72,300 and due to increase to £74,200 on 1 February 2013) will be placed on unfair dismissal compensatory awards.

It is expected that the changes will come into effect from summer 2013. They should give employers a welcome greater degree of certainty and confidence in managing hiring and firing decisions.