The use of settlement agreements to resolve workplace disputes in the right way
Published 08 March 2021
Two high profile cases and the resolution to the breakdown of the working relationship between employer and employee have recently made headline news.
The use of settlement agreements in such situations can often be a sensible way to resolve workplace fall outs, which are irreconcilable. It can help to avoid a lengthy and costly legal process and reputational damage.
A Settlement Agreement (formerly known as a Compromise Agreement) is a legally binding agreement between an employee and an employer (1)
A severance payment from the employer can be included with it and in return the employee agrees not to pursue any claims arising from their employment, and to keep the details confidential.
Two recent and widely reported instances in which such agreements appear to have been reached have thrust such arrangements back into the spotlight.
The government reportedly settled with former civil servant Sir Philip Rutnam over his claim for unfair dismissal (2)
It is reported that Sir Philip received £340,000 plus his legal costs as part of the agreement.
The ex-Home Office boss quit amid bullying claims against Home Secretary Priti Patel, which she denied.
The news came shortly after Buckingham Palace announced it was to launch its own investigation into allegations of bullying against The Duchess of Sussex (3). The Duchess denies the bullying claims.
Earlier newspaper reports said that two PAs who left the royal household signed non-disclosure agreements (NDA).
An NDA, also known as a ‘confidentiality clause’, is a written agreement usually included in a settlement agreement.
The controversial use of NDAs, dubbed ‘gagging clauses’, was highlighted in the sexual assault scandal that engulfed Hollywood movie mogul Harvey Weinstein in 2017 (4). He used NDAs as part of settlements with alleged victims.
It led the British government to ban the use of NDAs, which prevent victims of workplace harassment from speaking to police, lawyers and healthcare workers about their abuse.
A settlement agreement can be used to resolve a threatened or actual claim by an employee, or to remove any potential for future litigation.
Although most are often used to settle workplace disputes on termination of employment, settlement agreements can be put in place while the employee is still employed but has brought some form of internal complaint, for example one of discrimination.
In February last year ACAS published new guidance around the general use of NDAs at work (5)
That guidance to employers makes it clear that NDAs cannot be used to stop someone from:
- Reporting discrimination or sexual harassment at work or to the police
- 'Whistleblowing' (workers who expose wrongdoing in the workplace)
- Disclosing a future act of discrimination or harassment
NDAs should not be used to hide a problem or brush it under the carpet. If an employer still wishes to use an NDA, then ACAS advice is that employers should:
- Always give a clear explanation of why one is being proposed and what it's intending to achieve
- Ensure that a worker is given reasonable time to carefully consider it as they may wish to seek trade union or legal advice on its implications
- Think about whether it's better to address an issue head on rather than try to cover it up
- Never use NDAs routinely
Settlement agreement negotiations are normally protected either by the without prejudice rule or under the provisions of section 111A of the Employment Rights Act (6)
The protection applies in situations where there is an existing dispute between an employer and employee such as a disputed disciplinary process or the threat of bringing a claim.
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(1) What is a Settlement Agreement? [Internet] [Cited 8.03.2021] https://castleassociates.org.uk/support-centre/settlement-agreements-frequently-asked-questions-faq
(2) Government settled over a unfair dismissal [Internet] [Cited 8.03.2021] https://www.bbc.co.uk/news/uk-politics-56281781
(3) Buckingham palace to launch their own investigation with allegations of bullying. [Internet] [Cited 8.03.2021] https://www.itv.com/news/2021-03-03/buckingham-palace-to-investigate-meghan-bullying-allegations.
(4) Harvey Weinstein used NDAs as part of settlements with alleged victims [Internet] [Cited 8.03.2021] https://www.bbc.co.uk/news/entertainment-arts-41594672
(5) General use of NDAs[Internet] [Cited 8.03.2021] https://www.acas.org.uk/acas-publishes-new-guidance-on-non-disclosure-agreements-ndas
(6) What are settlements protected by? [Internet] [Cited 8.03.2021] https://www.legislation.gov.uk/ukpga/1996/18/section/111A