New reasons for using settlement agreements

New reasons for using settlement agreements

There are new rights for employees which will push employers to consider settlement agreements in cases where they were previously not commonly used.  Some situations are set out below.

Why this could push employers toward settlement agreements

With rights applying immediately, dismissing a new employee shortly after leave requests becomes legally risker and may lead to:

o   Discrimination claims;

o   Detriment allegations.

Settlement agreements offer employers a safer and more controlled exit route

The change could create staffing and scheduling disruption, particularly for SMEs and operational businesses

If disputes arise over attendance, flexibility or workload, employers may use a settlement agreement to avoid conflict.

Parental leave disputes often overlap with:

o   Flexible working requests

o   Sex discrimination claims

o   Unfair dismissal

Why this could push employers toward settlement agreements

Sickness related dismissals can quickly escalate into:

·       Disability discrimination claims;

·       Reasonable adjustment disputes;

·       Unfair dismissal claims;

·       Allegations of detrimental treatment;

·       Increased absence costs;

·       More workers gaining statutory protection may increase the likelihood or grievances or tribunal claims

Frequent sickness disputes can damage trust between employer and employee especially where attendance concerns become contentious

Where employers believe the relationship is no longer workable, settlement agreements are beneficial.

Why this could push employers toward settlement agreements

A procedural mistake in a redundancy process can now create extremely large liabilities. Failures may result in:

o   Six or seven-tribunal exposure, legal costs, and reputational damage

o   Settlement agreements can limit claims, secure waivers of protective award claims, and reduce uncertainty

Tribunals treat redundancy consultation failures seriously. Employers may therefore settle claims under a settlement agreement even where redundancies were commercially necessary, simply to avoid adverse findings.

Collective redundancy claims are especially dangerous because of the risk of numerous simultaneous claims.

Single failure can lead to mass tribunal claims, union involvement, and media attention.

Why this could push employers toward settlement agreements

Employers face broader legal liability, especially in sectors such as hospitality, retail and other customer-facing sectors.

·       Settlement agreements may be used to avoid claims and public scrutiny where preventative measures are challenged

·       Tribunals will assess whether employers took all reasonable steps, not merely some reasonable precautions

·       Settlement agreements are attractive where employers are unsure their measures meet the higher standard

Why this could push employers toward settlement agreements

Increase in uncertainty on whether a former employer will bring a tribunal claim. Employers may prefer to secure a clean break and remove future litigation risk early.

Employees will have more time to reflect, seek advice, and obtain supporting evidence before filing a claim

·       Increases the likelihood of disputes escalating long after employment ends and claims being filed

·       Employers may use settlement agreements as a risk-control tool

Delayed claims increase the risk that key details and documents are harder to retrieve or prove. This weakens employer defence positions.

Why this could push employers toward settlement agreements

Increase in potential liability due to an increase in unfair dismissal claims from new hires and greater scrutiny of early-stage dismissals.

·       Settlement agreements become more attractive to avoid tribunal exposure entirely.

With more employees being granted access to unfair dismissal rights, more of them will challenge dismissals and escalate disputes rather than accept the dismissal.

Dismissals that were previously low-risk, e.g., restructuring, now carry greater tribunal exposure. Risk increases for employers without strong HR support and organisations with informal processes.