Confidential pre-termination negotiations to come into force on 29 July

From this date, compromise agreements will be renamed 'settlement agreements', which employers will be able to use to bring an employee contract to an end under terms agreed with the employee.

Settlement agreements are legally binding contracts which can be used to end an employment relationship on agreed terms. Once in force, section 111A of the Employment Rights Act will prevent any offers or discussions about settlement agreements from being used as evidence in an unfair dismissal claim providing that certain criteria are met.

Acas, the publicly-funded conciliation service, published its code of practice on the use of settlement agreements last month. The guidance states that in order for the settlement to be legally valid, the final agreement must be in writing and relate to a "particular complaint or proceedings". The employee must have received advice on the terms and effect of the proposed agreement from a relevant independent adviser, who must be identified as part of the agreement.

Employees will not be prevented from bringing claims in relation to 'automatically unfair' dismissals, such as for whistleblowing, trade union membership or asserting a statutory right, by virtue of having entered into a settlement agreement. The confidentiality provisions will also not apply to grounds other than unfair dismissal, such as claims of discrimination, harassment, victimisation or claims relating to breach of contract.

They will also not apply where there is "improper behaviour" by one of the parties, in which case the tribunal will allow evidence to the extent that it considers it "just". A non-exhaustive list of potential examples of "improper behaviour" is included in the Acas guidance.