What employers need to know about settlement agreements

When employers are faced with potential claims from their employees it is quite common for them to enter into settlement agreements to resolve the dispute. However, not every claim can be resolved in this way. Some can only be settled through The Advisory, Conciliation and Arbitration Service (Acas), by using conciliation, which avoids the need for an Employment Tribunal. There is also quite a sizeable category of other claims which cannot be dealt with by either method: those where no compromise is possible.

In a number of these circumstances, the law is silent and legislation notably absent. As a result, there are different assorted claims that do not have any statutory mechanism for settlement. These include the right to statutory maternity or paternity pay, statutory adoption pay and statutory shared parental pay. Instead, there is an absolute restriction on contracting out of these payments. Other categories include claims for failure to notify the right to request working beyond retirement, and breach of the right to be accompanied at a meeting to discuss retirement.

Current legal opinion is that rights under the Data Protection Act 1998 (DPA) cannot be compromised. However, it may be possible to waive any civil claim for damages in respect of a breach of the DPA that occurred prior to the settlement agreement.

When it comes to personal injury claims, it is possible to reach a compromise. Nevertheless, employees’ professional advisers will often insist during any negotiations that latent personal injury claims, which the employee is not currently aware of, should not be compromised. It is, therefore, standard practice for such claims to be excluded from the list of claims waived.

Pensions are generally very well protected by the Pensions Act 1995 and other legislation. It is not, therefore, possible to waive any accrued pension rights, except in certain limited circumstances.

The conclusion: if in doubt, seek professional advice.

Published in Employee Benefits – 15 May 2018