How the Government are encouraging compromise agreements | LabourBlawg

How the Government are encouraging compromise agreements

by libcer on September 10, 2012

When employers decide to part with long-term employees, the fall-out can often be a cause of great stress and worry, while wasting a lot of time for both the business and the unfortunate employee. And although compromise agreements don’t completely alleviate all the negative connotations of a person leaving the workplace, they give a more open and simple way of resolving employment settlement  disputes.

The business community is beginning to agree; the Guardian reported last year that over 50% of companies had used compromise agreements in the past two years as a way of removing the threat of further issues during redundancy. And, keen to help UK businesses be as flexible as possible and encourage growth, the Government have announced plans for introducing quicker, more simplified forms of compromise agreements.

What do the new plans involve?

Under the second reading of the Enterprise and Regulatory Reform Bill, the Business Secretary Vince Cable plans to make compromise agreements more accessible for businesses, in the hope of kick-starting the economy. Under the new proposals:

  • Employers will now have the power to offer compromise agreements to employees before a formal dispute arises. Previously, employers weren’t able to hold discussions about agreeing terms of departure if there were no pre-existing disputes between the parties.
  • Employees will be able to reject their employer’s offer of a compromise agreement, in which case the individual circumstance will need to follow the same fair employment process as before. After an employee rejects a compromise agreement and the company continues with dismissal, there may still be at risk of an unfair dismissal claim.
  • However, the employers will be legally protected from using discussions of the settlement agreement being used in evidence in any subsequent unfair dismissal claim.
  • Compromise agreements will now be known as settlement agreements.

What does this mean for me?

Business leaders have welcomed the approaches, believing they will make employment simpler and encourage companies to hire more staff. In the long-term, these plans hint that compromise agreements will become even more popular – while the number of employment tribunals will fall. So, if you are

The Government hopes that this more streamlined approach may settle any disputes before they get out of hand, giving businesses greater flexibility and helping them to save money in the long run as they avoid expensive legal costs from tribunals. So, if you are an employee at risk of losing your job, the new plans can offer minimised stress and worry if it helps to avoid tribunals – while you are still given the option of rejecting any agreements that are offered.

Although these plans appear to give more control to employers when managing employee departures, they still must be very careful if there is any risk of a discrimination claim. The Government proposals only seem to give protection and simplicity to businesses during a straightforward unfair dismissal claim; if there is a threat of a discrimination case arising then it could become much harder to navigate. In discrimination cases, the discussions of compromise agreements could still be referred to in tribunal.


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