Urgent – a must read legal update for anyone dealing with employee dismissals
Settlement agreements or early conciliation? A deafening silence…what legal advisors are not telling employers.
Since May this year (2014) employers (and employees) have been able to access a new service from ACAS, Early Conciliation. In words plucked from ACAS’s website:
“If you are going to make a claim to an employment tribunal you must now notify ACAS first. We will offer you the chance to use Early Conciliation – an opportunity to settle workplace disputes without going to court”
Prior to May 2014, any employer who wanted to make an out of court settlement with an employee (before any actual legal claim had been brought by the employee) was able to do so using a Settlement Agreement, formerly known as a compromise agreement. (A less well known alternative was to use the ACAS service called pre-claim conciliation).
For those interested, take a look at our two minute guide to Settlement Agreements.
Prior to May 2014, the free ACAS conciliation service (leading to a COT3 agreement) tended to only be used once a legal claim had actually been brought.
An alternative to Settlement Agreements
Although Early Conciliation came into force in May this year, we have heard no-one talking about how Settlement Agreements could pretty much become redundant with the advent of this new free service from ACAS. It’s starting to feel like a deafening silence, or perhaps it’s just that no one has twigged? Are employers being made aware by their legal advisors that when an employee has started to talk about unfair dismissal, discrimination or employment rights etc. that there is an alternative to the Settlement Agreement and that going down the Early Conciliation route could save them some serious money and hassle?
The reality of course is that legal firms (and some HR consultancies) earn significant sums both from advising employers on the use of Settlement Agreements and drafting the necessary documentation, plus advising employees on the Settlement Agreements offered to them by their employers, and where appropriate, supporting them with negotiating larger sums. In some instances, they also generate revenue as a result of supporting the employee in bringing a legal claim against their employer after a Settlement Agreement has been rejected. Therefore it’s not in a legal advisors’ best financial interest to promote Early Conciliation over Settlement Agreements.
You might be wondering whether this is a storm in a tea cup as not that many employees are ‘paid off’. However the reality is that some companies use a Settlement Agreement with each and every employee who leaves them and generally, in our experience, they are widely used across the UK.
So with pay offs occurring on a regular basis, which route should you take if wanting to pay off an employee in such a way that that employee will be prevented from ever pursuing their claim against you through an Employment Tribunal? Settlement Agreement or Early Conciliation? Here’s a quick summary to help you decide:
When: Can potentially be offered to an employee at any point (a clear dispute between the parties is no longer a legal requirement prior to offering a Settlement).
Cost: Legal fees apply – advice and documentation (between £500 and £2000+ depending on who you use and complexity of the issue).
Time: You have to allow up to 10 days for the employee to meet with and get legal advice on the Agreement you have drawn up. If the employee is still employed this could therefore cost you at least another 10 days pay. There might also be a few days/weeks after this of continued negotiation and discussion if the solicitor advises them not to sign.
Risk: Solicitor they meet with advises them that they should be pursuing you for more money or that they could be making more claims against you (e.g. add in a sex discrimination claim alongside the breach of contract claim you were settling on).
When: Can be initiated at any time by either employee or employer after an employee has suggested that they might, or could, bring an employment claim against you (this is often raised either politely or as a threat during disciplinary, redundancy, grievance hearings etc). From our experiences of this new service to date, no legal paperwork or documentation needs to have been submitted to either ACAS or an employment tribunal.
Cost: Free (although perhaps one hour of legal support to draft the COT3 if the ACAS conciliator doesn’t do that for you).
Time: ACAS required to respond to a request to conciliate within two days. Time required then is whatever is needed for various parties to speak individually with conciliator by phone to reach an agreement. No face to face meetings required.
Risk: ACAS conciliator in our experience tends to adopt the approach of simply seeking an agreement from both parties to how much money will be paid. In our experience, it is highly unusual for a conciliator to advise the employee about any further claims they might bring or the validity of any current claims and we have had regular experience of conciliators saying that they don’t wish to have sight of any documents pertinent to the dispute.
Feeling that the employee is going to be hard done by?
Well it is probably swings and roundabouts on this one. We have experience of employees saying they don’t want the hassle of finding a solicitor and meeting with them and just want to sign on the dotted line as they accept the monies being offered. We also have experience of employees getting fed up because the solicitor they are using is putting up too many obstacles and starting to incur costs in excess of what their employer will pay when in fact they just want it done and dusted so they can move on.
On the flip side, there will be employees who come across a great solicitor and who get really valuable advice and also employees who are feeling isolated and who will really value having had a expert check over the legal document they are being asked to sign.
Sticking with always using Settlement Agreements because that’s the way you have always done it thus far, could waste money (and possibly time). Considering the option of using Early Conciliation, where appropriate, could save you significant sums (and potentially be a faster process) as well as remove the risk of an employee having their expectations raised by the solicitor you paid them to visit.
Whatever route you choose, we hope you are now a little bit more aware of the options you have however, please note that for the purposes of providing you with a concise summary today, you do need to get legal advice on each employee issue and, whatever you do, make sure you have a Plan B should the monies you offer, not be accepted.
For a few more thoughts and ideas about Early Conciliation, see this blog written by Helen Jamieson in April 2014, just as Early Conciliation was coming into force.
For commercial and practical advice or support with any employment issues please do call Jaluch on +44 1425 479888.
The information contained within this article is for general guidance only and represents our understanding of employment and associated law and employee relations issues as at the date of publication. Jaluch Limited, or any of its directors or employees, cannot be held responsible for any action or inaction taken in reliance upon the contents. Specific advice should be sought on all individual matters.