{"id":706,"date":"2022-02-16T11:57:13","date_gmt":"2022-02-16T11:57:13","guid":{"rendered":"https:\/\/www.abhrsolutions.co.uk\/?p=706"},"modified":"2022-02-16T11:57:13","modified_gmt":"2022-02-16T11:57:13","slug":"out-of-court-settlements","status":"publish","type":"post","link":"https:\/\/www.abhrsolutions.co.uk\/out-of-court-settlements\/","title":{"rendered":"Out of Court Settlements"},"content":{"rendered":"
In the world of HR Support, we spend much of our time sorting and settling cases before they get anywhere near an Employment Tribunals saving legal costs and the risk of reputational damage because Tribunal proceedings are open to the public.<\/p>\n
So, let\u2019s answer a few questions?<\/p>\n
These are both forms of agreement between an employer and an employee where the employer agrees to pay the employee a sum of money \u2013 often on the basis of \u201cno admission of liability\u201d and in return the employee waives any rights that they may have to pursue any actions against the employer arising out of the termination of employment.<\/p>\n
Both are legally binding but there are slight differences.<\/p>\n
A settlement (previously called compromise) agreement is invariably used for middle\/senior level terminations and the employer is required to give the employee a sum of money \u2013 often about \u00a3500 \u2013 to take legal advice on the proposed settlement. A settlement agreement is only binding where there is a certificate signed by a solicitor to confirm that the employee took legal advice prior to signing the agreement.<\/p>\n
A COT3 is facilitated by ACAS and is commonly used as an alternative to a settlement agreement. An agreement is drawn up to set out the basis of the agreement and ACAS then manage the conciliation process between the parties and reach a legally binding agreement. A form \u2013 called a COT 3 \u2013 is then signed by the parties and is legally binding.<\/p>\n
They are used where there is a potential dispute between employer and employee often arising out of a termination and there is a risk that the employee will pursue a Tribunal action and the preferred course of action is to settle out of court to prevent a long and protracted process.<\/p>\n
You might use them in situations where an employee<\/p>\n
Normally, settlements are \u201cfull and final\u201d but commonly actions related to pension scheme membership or in connection with personal injury claims are not covered. However, it is very common for the employee to state that \u201cthey are not aware of any issues at the point of signing the agreement that could give rise to such a claim\u201d.<\/p>\n
It is quite common for the parties to mutually agree the wording of a reference because the employee would otherwise be concerned that the employer could write a derogatory reference so it is always advisable to agree the reference wording as part of the agreement.<\/p>\n
They are only confidential as long as there is a clause that prevents either party disclosing the terms of settlement. If a Company has made a significant settlement to an employee, it is not in the employer\u2019s interest if the employee is then free to tell other employees how much they were paid off. So, confidentiality clauses \u2013 sometimes called NDAs \u2013 non disclosure agreement – are an absolute necessity.<\/p>\n
Normally the employee will be allowed to tell close family but it is on condition that they also agree to keep the terms confidential.<\/p>\n
Normally \u2013 yes. An agreement will itemise what payments the employee will receive and a further clause will set out which payments are to be made tax free and which payments are liable to statutory deductions.<\/p>\n
In most cases, it will be clear which payments are taxable but there may be some payments which are often referred to as ex-gratia which may be made without deduction of tax subject to a limit.<\/p>\n
Yes. If the employee has a Company car, it might stipulate when the car is due to be returned if the return date is after employment has terminated and it will invariably set out who is liable for payment of fuel depending on whether the employee\u2019s car was fully expensed or if they had use of a fuel card.<\/p>\n
Similarly, if an employee has membership of a Private Health Care scheme the agreement will set out what level of cover the employee has and when it will cease.<\/p>\n
There will also be a statement to say that where the employee has any Company benefits after employment has terminated, it will attract a P11D liability.<\/p>\n
<\/p>\n
Sometimes, the relationship between employer and employee may have just broken down or the employee has reached their \u201cbest before\u201d date and there are underlying performance issues and no-one quite knows how to address the situation and in such situations, a settlement agreement or an ACAS COT3 is an excellent way to mitigate the risk.<\/p>\n
These type of agreements give peace of mind and, due to Covid, there is a considerable backlog in the Tribunal system and invariably it will take a minimum of 18 months from the termination date before an Employment Tribunal case will be heard.<\/p>\n
If you want advice on any of the issues raised, Adrian Berwick gives practical advice and support \u2013 either call 07885 714771 \u2013 or e-mail adrian@abhrsolutions.co.uk<\/a>.<\/p>\n