ACAS (Advisory, Conciliation and Arbitration Service) has begun consultation on a statutory code of practice which will run in parallel with legislation on settlement agreements (formerly compromise agreements) which will make pre-termination negotiations inadmissible in an unfair dismissal claim.

The Enterprise and Regulatory Reform Bill will introduce a provision into the Employment Rights Act 1996, whereby discussions between the employee and employer which taken place with a view to terminating employment on agreed terms will be confidential. As a result employees will not be able to use these negotiations as evidence in an unfair dismissal complaint, and if the parties reach a settlement, the employee will be prohibited from bringing a tribunal claim under the jurisdictions listed in the settlement agreement. However, where there is improper behaviour in relation to a settlement agreement, confidentiality may not apply.

The ACAS code of practice will set out the broad strokes covering the use of settlement agreements in a termination dispute, and will be accompanised by non-statutory guidance.

The code is likely to set out good practice relating to offers and negotiation of settlement agreements, to include written initial offers and that employees should have the right to be accompanied at relevant meetings.

The ACAS code will also propose that employees should be allowed a reasonable period of 7 days (minimum) to consider a settlement offer, and ACAS are inviting views on this in the consultation period.

ACAS confirms that the new settlement agreement legislation and accompanying ACAS code will be in force by the summer of 2013.