On 29 July 2013, the following sections of Enterprise and Regulatory Reform Act 2013 (ERRA 2013) into force:

  • Pre-termination negotiations- a new, but complex statutory framework that will allow for certain discussions to remain confidential from a tribunal in unfair dismissal cases only. Section 14.
  • Compromise agreements and compromise contracts- will be renamed as "settlement agreements" in all relevant pieces of employment legislation. Section 23.

Pre-termination negotiations – these are limited to unfair dismissal claims only and can be seen as beneficial to both an employer and employee.

What does this mean in practice?

An employer will be able to conduct negotiations on a confidential basis with an employee to terminate the employment relationship even when there is no prior dispute (e.g. capability) between both parties.

The confidential angle of these negotiations protects the employer from details of any conversations being relied upon as evidence in an unfair dismissal claim.  This is subject to the employee in question having the requisite length of service.

Pre-termination negotiations could also be considered beneficial in situations where an employer finds that an employee no longer ‘fits’ within the business and wants to terminate the employment however does not have a fair and legal reason to rely upon to terminate the employment relationship.

Previously to these changes coming into force there had to be some sort of prior dispute between both parties, this would have provided the employer protection where negotiations to terminate employment were being held.

For example where an employer was faced with concerns regarding the performance of an employee there would be a need by the employer to instigate a performance improvement plan that would question the capability of the employee and the work that was expected of them.  Performance improvement plans can often be a long drawn out process. Where there is not any improvement in performance this could result in a decision to dismiss on the grounds of capability.

The pre-termination negotiations and the reasoning behind this would mean a swift and early exit of an employee could be agreed upon, thus saving time, energy and resources.

However, there are some important exemptions.

Pre-termination discussions will remain admissible in an unfair dismissal claim  where "anything said or done which in the tribunal`s opinion was improper, or was connected with improper behaviour". Examples of such behaviour would be harassment , bullying or applying undue pressure.

Another important exemption is that the provisions of any pre-termination negotiations will not apply to discrimination cases, whistle blowing, harassment, victimisation, breach of contract, wrongful dismissal or other types of claim.

Any pre termination negotiations that were agreed upon would be binding under a ‘settlement agreement’ which will be the new name for compromise agreements and compromise contracts from the 29 July 2013.

There is a new ACAS Code relating to pre terminations discussions and settlement agreements.