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Lawyers back Cable’s plans for settlement offers

New clause in bill would prevent staff from using offers against employers

15 June 2012

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Employment lawyers have welcomed the business secretary’s announcement that a new clause will be inserted into the Enterprise and Regulatory Reform Bill ensuring that offers to settle cannot be used against employers in unfair dismissal cases.

During the bill’s second reading in the Commons, Cable said the government wanted to encourage parties to reach agreed solutions at an earlier stage and the new clause would “facilitate the use of settlement agreements”.

Rob Riley, partner at Addleshaw Goddard in Leeds, said: “Often things do get settled and it’s very useful for employers to have open discussions without fear that people will say afterwards ‘you’ve made up your mind’.”

“This clause would allow them to be protected regardless of the circumstances.”

Riley said the situation had been complicated since the EAT’s ruling in BNP Paribas v Mezzoterro, which limited the use of the without prejudice rule to discussions where there was already an existing dispute.

“What we’ve had to advise is that there is a risk that, if the conversation breaks down, whether or not there is a grievance procedure going on, they may not be protected by without prejudice.”

James Davies, joint head of employment at Lewis Silkin, said the move on settlement agreements was a “positive step but not a particularly radical one”.

He said that it attempted to address both the issue of compensated no-fault dismissal and the ‘protected conversations’ proposed by Cable a few months ago, which Davies dismissed as a “bully’s charter”.

He went on: “The new scheme is not so much about conversations saying ‘you’re hopeless and we think you should leave, and we’re going to fire you’ than ‘here are the terms if you agreed to leave’.”

Davies said some employers were concerned that offers of payments could “come back to haunt them” if employees later claimed at tribunals that the processes used to assess under-performance were a sham.

“This is a perfectly valid concern which has deterred some employers from making offers,” he said. “The new clause will help, but it will not have a dramatic effect.”

Davies said that offers could be evidence of discrimination and employees might bring discrimination claims alongside unfair dismissal so details of offers could be heard.

Phil Allen, partner at Weightmans in Manchester, said the new clause on settlement offers was a “really good idea”.

Allen went on: “It’s good news for employers. Many have without prejudice discussions that arguably are not without prejudice at all.

“If they could have more certainty, I think they would have these conversations more frequently.”

Allen said it would be “very difficult” for employers and staff to go back to a normal relationship once an offer had been made, but not impossible. He said that he had known at least one case where this had happened.

Allen added that although the clause might protect employers in unfair dismissal cases, they could not exclude the risk that conversations would be referred to in discrimination claims.

The Enterprise and Regulatory Reform Bill enters its committee stage in the Commons next week. Among those giving evidence will be the Law Society, the Equal and Human Rights Commission and, on Thursday, Adrian Beecroft.A spokesman for BIS said no decision had been taken.

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