12 Jun 2012

Will the Government’s Proposed Settlement Agreements for Failing Workers prove Effective?

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The Government has outlined its plans for the introduction of settlement agreements which are intended to allow employers to encourage failing employees to leave in return for an agreed pay-off.

The agreements, a simplified version of compromise agreements, are intended to resolve disputes quickly with underperforming, misbehaving or negligent staff. In return for making a compensation payment to the worker, an employer will be able to dismiss the individual without risk of the matter being referred to an Employment Tribunal.

Employees will have no obligation to agree to a settlement offer and will retain all employment rights. However, any offers or discussions relating to a settlement that take place between the parties involved will not be allowed to be used as evidence in unfair dismissal claims at a Tribunal.

So, do the plans offer advantages to employers when compared to the current position? The Government believes that it will allow organisations to keep their workforce flexible. They also think that offering a means of solving workplace problems will encourage employers to recruit because they are safe in the knowledge this there is an effective mechanism for avoiding the expensive legal costs and potential compensation awards of an Employment Tribunal.

In reality, however, a similar mechanic already exists in the form of compromise agreements. The advantage of the proposal is that the planned legislation will provide a standardised and prescribed format for the settlement agreement process which will allow employers to minimise or even avoid the legal fees involved with compromise agreements.

It will be interesting to see how many of the proposed agreements are successfully concluded. To date, there has been no indication as to how we will arrive at a fair and reasonable compensation figure. Without appropriate advice, the expectations of a worker may be excessive which could mean that there will be a low success rate.

From MCM’s perspective, the real issue with the proposal is why should an employer have to pay compensation to an employee who is underperforming or has been found guilty of misconduct? Indeed, could someone deliberately misbehave or fail to contribute simply to provoke an employer into making an offer? Settlement agreements could provide a quick, pragmatic solution but they will not ensure that justice has been done!

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Director MCM

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