Contracting Out of Claims and the Limits on Settlement

Key Points

  • Acceptance by a dismissed employee of a sum of money in full and final settlement of claims he may have against his former employer will not by itself prevent him bringing unfair dismissal or certain other types of claim in an Employment Tribunal.
  • There is a general rule that, subject to important exceptions, any provision in an agreement by which an employee agrees not to bring tribunal proceedings will be void (ERA 1996 s.203).
  • In order to be binding, such an agreement must be in the form of a settlement agreement (formerly known as a compromise agreement) or an agreement that has been ratified by an Acas conciliation officer (see ERA 1996 s.203(2)(e)) or an agreement to submit to arbitration by Acas, which results in a settlement.
  • An agreement that settles contractual claims (e.g. for wrongful dismissal) only (not statutory claims) need not be in this form to be valid. This also covers claims for breach of contract that have been brought in an employment tribunal: Carter v Reiner Moritz Associates Ltd [1997] ICR 881.
  • The basic rule is that neither employers nor employees can validly agree to "exclude or limit the operation" of the legislation or to exclude the right to make a complaint to an Employment Tribunal (see eg ERA 1996 s.203; Equality Act 2010 s. 147(3); TULRCA 1992 s.288, TUPE regs, reg 12) other than through the means set out above.
  • Only certain statutory claims can be compromised by a settlement agreement  Some claims cannot be settled at all, for example claims for statutory maternity, paternity or adoption pay.Others can only be settled by ACAS ( s 18 Employment Tribunals Act 1996 as amended by The Employment Tribunals Act 1996 (Application of Conciliation Provisions) Order 2014
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