Employers may find themselves in a position where they wish to propose a settlement agreement to offer certain things to an employee, such as a lump sum payment, in exchange for the employee agreeing to the termination of their employment. The worry with commencing negotiations is that an employee could then perhaps use details of such negotiations in a future employment tribunal to demonstrate that he or she was constructively dismissed. It is important for an employer to know that they can engage in such negotiations without having to worry that whatever they say could be used against them in the future.
There are two ways that can prevent such negotiations from being used in a tribunal. The first is to rely on the ‘without prejudice’ principle and the second is to rely on section 111A of the Employment Rights Act 1996.
The effect of the ‘without prejudice’ principle is that, where there is a dispute between the parties, any written or oral communication between them which is comprised of genuine efforts to resolve their dispute will not generally be admitted in evidence at a subsequent hearing of the employee’s claim. This enables parties to negotiate fully and frankly without the risk that anything they say or write in the course of negotiations will be used against them in future tribunal proceedings if the negotiations fail.
In order for settlement discussions and agreements to be protected under the ‘without prejudice’ principle, there must be an existing dispute between the parties and a genuine attempt to settle that dispute. Both parties will also have to agree to enter into these “without prejudice” discussions and there must not be any unambiguous impropriety from either party. Parties should take advice about this before engaging in such discussions.
Section 111A Employment Rights Act
Section 111A of the Employment Rights Act 1996 provides for a particular type of negotiation to take place which can apply to more situations than the “without prejudice” scenario described above. This is because this type of negotiation does not require there to be an existing dispute between the parties. These provisions provide a similar protection to the ‘without prejudice’ principle but apply only to settlement offers and discussions that relate to unfair dismissal (including unfair constructive dismissal) claims brought to an employment tribunal.
You should state before conducting any protected conversation that the discussions about to take place are confidential by virtue of the legislation and that they cannot be relied upon in any subsequent unfair dismissal case. You should discuss the proposals face to face at an agreed time and place. You should give reasons for the proposed settlement agreement at the outset, give the employee a reasonable period of time to consider the terms of the written settlement agreement proposal and allow the employee to receive independent legal advice. The ACAS Code of Practice suggests a minimum of 10 calendar days.
Any correspondence in relation to settlement discussions should be regarded as separate from correspondence relating to disciplinary or performance management procedures such as invitations to disciplinary meetings. Moreover, any discussions that may have taken place about the employee’s conduct or performance as part of the settlement agreement negotiations should not form part of these procedures.
The provisions of section 111A do not apply to automatically unfair dismissals, such as a dismissals for whistleblowing. The provisions of section 111A may also not apply in any type of unfair dismissal claim if there has been some improper behaviour in anything said or done in relation to the settlement negotiations. The test for “unambiguous impropriety” under the ‘without prejudice’ principle is narrower than the improper behaviour test under section 111A. Also, the protection does not operate where there is a claim for anything other than unfair dismissal.
In my view, the exceptions to the protected conversation rules are so wide that the employer should, where possible, use the tried and tested method of a ‘without prejudice’ conversation by seeking to get the employee to acknowledge a dispute before discussing departure terms. This procedure could be used in conjunction with the section 111A procedure for added certainty. In certain limited circumstances however the section 111A procedure can be adopted. If using such a procedure, employers should take specialist advice before doing so.
Ultimately, it is crucial that employers follow a fair process before an employee is dismissed. Failure to do so will leave them vulnerable to potentially losing any subsequent unfair dismissal claim.
Trainee Solicitor – Employment Law