July 29, 2013 was a big day for employment law in the UK.

Firstly compromise agreements were renamed ‘settlement agreements’. This is largely a rebranding exercise but one that is welcome as we now have a title which more accurately describes what the agreement is designed to achieve.

On this same date, changes around ‘pre-termination discussions’ came into effect. These changes are contained in the Enterprise and Regulatory Reform Act and talk about ‘confidentiality of negotiations before termination of employment’. The theory behind this new law is that employers should be able to discuss with their employees the option of the employee leaving with a settlement agreement without the risk that that discussion itself will be used against them in a future claim.

All sounds quite sensible. However, there are three important exceptions where this rule will not apply—so beware.

1. Unless the discussions are genuinely ‘without prejudice’ under the current rules (i.e. discussions in relation to settling a dispute) then the protection of pre-termination negotiations only applies to ‘normal’ unfair dismissal claims. Any discrimination claims, breach of contract claims and critically any automatic unfair dismissal claims (whistleblowing) will not be covered. As you seldom feel confident enough to be sure that someone will not consider a dismissal to be related to whistleblowing or discrimination, relying on these new protections will be a leap of faith in many cases.
2. The second exception is that whilst you are negotiating, you cannot commit ‘improper behaviour’. If you do, the discussions will be admissible. The precise meaning of ‘improper behaviour’ will be something that we will watch develop over the coming years but in the meantime employers needs to be extremely careful and measured when conducting such discussions to avoid losing the protection.
3. The pre-termination negotiations will still be admissible to the Employment Tribunal if a party wants to make a costs application (at the end of the hearing) on the basis that an offer has been unreasonably refused, so the law in that area remains the same as at present.

On the same day fees were introduced in the Employment Tribunal. The fees range from £150 for lodging the claim to £950 for the actual hearing, depending on the type of claim you are bringing. In addition, unfair dismissal damages are now capped at £74,200 or a year’s pay—whichever is the lower.

The intention of these changes is to allow employers to manage difficult workplace issues more easily and cheaply, allowing employees to leave more graciously rather than having to face protracted performance proceedings. This could therefore result in a positive outcome for all but a word of warning—employers should embark on these pre-termination negotiations with extreme caution and advanced planning to ensure that they do fall within these new provisions and really do remain off the record.