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Will the government’s new settlement agreements destroy mutual trust and confidence?

13 June 2012

In the second reading of the Enterprise and Regulatory Reform Bill Vince Cable confirmed that he will be making amendments to the Bill at the committee stage to increase the use of settlement agreements (currently compromise agreements). Little detail was given as to how such agreements would work in practice but they will go further than the current ‘without prejudice’ rule as there will be no need for an existing dispute. Genuine ‘without prejudice offers’ made in an ongoing dispute cannot be adduced as evidence in Tribunal, where as offers of settlement agreements may be.
The Shadow Business Secretary (a former employment lawyer) raised concerns whether the relationship of trust and confidence would be able to survive an employee rejecting a pay-off offer made out of the blue without him or her having done anything wrong. Such a situation could lead to a claim of constructive dismissal and therefore begs the question whether settlement agreements will “ease the handling of workplace disputes”.

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