ACAS has published its response to consultation on a statutory Code of Practice on settlement agreements, and in particular on the new provision for employers to have “protected settlement discussions” introduced by the Enterprise and Regulatory Reform Act and planned to come into effect this summer. This will enable employers to hold termination settlement discussions prior to starting a disciplinary or performance management process without the risk of the discussion being referred to in an ordinary unfair dismissal claim, unless there has been “improper conduct”.

Many of the changes are to explain more clearly the effect of the new protection. Other changes to note include:

  • The Code still includes good practice tips, expressed as actions the employer “should” take, whereas legal requirements are set out as steps the employer “must” take.
  • It is now clear that employers do not have to give reasons for proposing termination, although this is suggested to be helpful. It is also described as best practice (rather than a requirement of the Code) to allow the individual to be accompanied by a colleague or union representative to a meeting to discuss the proposals.
  • A key part of the Code focuses on what is meant by improper behaviour. Acas states that it is not possible to provide an exhaustive list of such behaviour. The non-exhaustive list includes all types of discriminatory behaviour and “putting undue pressure on a party”. The examples of undue pressure given have been amended. The first draft included an employer allowing the employee less than seven working days to consider the offer or reducing the value of the offer within this time. The revised version amends this to “not giving the reasonable time for consideration” set out in paragraph 12 of the Code. Paragraph 12 provides that “what constitutes a reasonable period of time will depend on the circumstances of the case. As a general rule, a minimum period of ten calendar days should be allowed to consider the proposed formal written terms of a settlement agreement and to receive independent advice, unless the parties agree otherwise”. This provides employers with a little more flexibility. The Code also contains a new paragraph giving non-exhaustive examples of conduct that is acceptable: setting out in a neutral manner the reasons that led to the proposal or factually stating the possibility of starting a disciplinary process if agreement is not reached.
  • The template letters are to be revised and moved to as yet unpublished non-statutory guidance.

The Code has now been approved by Ministers and laid before Parliament on 13 May under the negative resolution procedure. Unless either of the Houses objects, it can be brought into force after 40 days.