What’s in a name? Compromise Agreements “are to be renamed Settlement Agreements.”

Major employment law changes are underway. On 23rd November 2011 the Government published its Response to Resolving Workplace Disputes intended in part to ensure that both employers and employees have greater access to resolving disputes as early as possible, and in the most streamlined way.

One such proposal which is likely to be implemented very shortly is to rename the term “compromise agreement” to “settlement agreement”. But why the change? After all, the use of compromise agreement terminology to settle employment disputes has been around for a significant number of years and has become a familiar term.

The Government’s reasoning is clear. It is considered the use of the word “compromise” is one that can give the impression to an employee of an unequal bargaining position, and where they may not getting a fair deal. The focus from a departing employee may be one of “compromising” their employment law rights as opposed to addressing a settlement that may actually be fair. Hence the settlement agreement wording will “emphasise the benefits they can offer as a way of resolving and bringing finality to disputes.”

And that is not all. The Government is also looking at ways to produce a “model” agreement to address concerns (especially from small firms) about the complex terminology used in the agreement. Any such model wording would need, however, to allow the flexibility of both parties to incorporate specific wording relevant to a departing employee’s circumstances.  For example, no model agreement can cover situations such as garden leave provisions, handover responsibilities, return of specific company property, the provision of a job reference and other matters that will be of  prime importance to either party.

The compromise agreement as it presently stands is passed backwards and forwards for revisions between the employment lawyer acting for the employee and the employer (or their own lawyers). The process can be completed in a day, or take much longer depending on the extent of the revisions necessary and what is capable of being agreed.  An overly simplified “model settlement agreement” may therefore backfire and end up making it more difficult to reach agreement if employees become suspicious of a lightweight document. After all, they lose the same employment law rights once the agreement is signed- whether the document is a simplified version or otherwise.

Other employment law changes

There are also a number of other employment reforms taking place, the most important of which are:

  • Increasing the qualifying period before you can claim unfair dismissal to 2 years from 6th April 2012. This will only affect employees starting new employment from this time. It is not retrospective.
  • Unfair dismissal cases will generally be heard before a “judge sitting alone” rather than the usual tribunal of 3 parties. You can still request a full tribunal, but it is not automatic.
  • The Government has confirmed that it is seeking views on a requirement for all claims to be lodged with ACAS for conciliation before they can proceed to tribunal, together with a penalty (at the judge’s discretion) for employers who are found to have breached employment rights.  A new concept of “protected conversations” is also being considered to allow employers to raise issues such as poor performance in the workplace or retirement in an open way without fear of facing a claim by an employee.

So, will these changes be for the better? Only time will tell, but as always it is best to obtain professional advice at an early stage.

Share Button