Government publishes response to consultation on ending the employment relationship

The Government has published its response to the consultation on "Ending the employment relationship", which sought views on, among other things, various measures to facilitate the use of settlement agreements and the introduction of a reduced cap on the compensatory award for unfair dismissal. 

Settlement agreements: The Enterprise and Regulatory Reform Bill has already been amended to insert a new section into the Employment Rights Act 1996 to provide that: "Evidence of pre-termination negotiations is inadmissible in any proceedings on a complaint under s.111 [that an employee has been unfairly dismissed by his or her employer]." In effect, the provision allows an employer to hold a discussion with an employee with a view to terminating his or her employment under a settlement agreement, without the employee being able to rely on the details of the conversation as evidence in an unfair dismissal claim. The Government response to the ending the employment relationship consultation (PDF format, 450K) (on the UK Government website) confirms the following. 

  • It will produce guidance on "how the appropriate use of settlement agreements sits within broader good management practices and the type of good practice that employers ... should normally follow". Both employers and employees will be protected against "improper behaviour", which will disapply the rule that certain evidence will be inadmissible in unfair dismissal claims. Further clarification of what constitutes improper behaviour will be included in the statutory code of practice and accompanying non-statutory guidance. 
  • Pre-termination settlement offers to employees will not be admissible as evidence in constructive dismissal cases. 
  • The rule on the inadmissibility of pre-termination settlement offers will not apply to contractual disputes and "the fact that settlement was offered would remain admissible in the wrongful dismissal part of any claim". 
  • The statutory code of practice (to be written by Acas) will "principally complement the legislative change being taken through the Enterprise and Regulatory Reform Bill" whereas employers will be able to use the model settlement agreement, which will be included in the accompanying non-statutory guidance in a wider set of circumstances. The guidance will also explain the practical implications of the new rule on the inadmissibility of certain evidence. 
  • The Government will not set a guideline tariff for settlement agreements, but the non-statutory guidance will include factors that both employers and employees may consider when negotiating a financial settlement. 

Compensatory award for unfair dismissal: The Government response to the consultation on "Ending the employment relationship" also confirms that subject to parliamentary approval, the Government intends to introduce an individual cap of 12 months' pay of the employee concerned, which will apply where this amount is less than the overall cap (currently £72,300). 

Also

The XpertHR employment law manual sets out the current law on alternative methods of dispute resolution and tribunal procedures and penalties.