At the Enterprise and Regulatory Reform Bill's Second Reading on 11 June, the Business Secretary, Vince Cable, announced that he will make amendments at Committee Stage to increase the use of settlement agreements (currently known as compromise agreements). He did not give any detail of how the clause would be worded, stating simply that it would 'ensure that the offer of a settlement cannot be used against an employer in an unfair dismissal case'. As with the majority of the Government's employment law reforms the changes are intended to 'boost business confidence and ease the handling of workplace disputes'.
The new clause is intended to make it as easy as possible for small employers to use settlement agreements without having to resort to legal advice. The Government believes that this can be achieved by ensuring that employers can offer settlement agreements before a formal dispute arises without this offer being used as evidence in an unfair dismissal case. The Government argues that as employees can reject the offer of a settlement agreement and proceed to a tribunal, they will continue to enjoy full protection of their employment rights.
Although the proposals may not appear radically different to how compromise agreements can be used at present, the Government hopes that they will encourage more small businesses to use them, especially before the formal dispute stage. During the Bill's Second Reading debate the Shadow Business Secretary (and former employment lawyer), Chuka Umunna, highlighted that, currently, 'without prejudice' offers of settlement made in an ongoing dispute cannot be adduced as evidence in tribunals, whereas pay-off offers made where there was no pre-existing dispute can. In Mr Umunna's view, the relationship of trust and confidence would be unable to survive an employee rejecting a pay-off offer made out of the blue without him or her having done anything wrong. Norman Lamb, Minister for Employment Relations, responded to this point by simply stating that if 'there is no agreement, the employee's rights are still protected. They have to work together to ensure that the employment relationship is maintained'.
In the course of the debate, Mr Cable insisted that the Government does not intend to table further amendments to the Bill in order to implement recommendations in the Beecroft report, such as 'no-fault dismissals'. He also indicated that the Government does not have current plans to allocate additional funds to Acas for its expanded conciliation role under the Bill. Mr Cable stated that 'it is important that it is properly resourced... but we have had no warnings that it cannot handle the processes that we propose to introduce'.
The Government will publish a consultation in the summer on guidance principles for the use of settlement agreements, as well as draft letters and model templates for both employers and employees.