A recent change in legislation has meant changes for the way employers handle discussions relating to dismissal
As part of the government’s efforts to reduce red tape for employers, the concept of pre-termination negotiations was introduced on 29 July 2013. This article explores this legal development and how it might assist practice managers in managing employment issues within their practice.
Section 111A of the Employment Rights Act 1996 provides that any offer made or discussions held before termination of employment, with a view to it being terminated on terms agreed between the employer and the employee, will be inadmissible for the purposes of any subsequent unfair dismissal claim.
The new legislation is backed up by the Acas Code of Practice on Settlement Agreements (the Acas Code), which fleshes out the legislation and provides user-friendly guidance on the process that employers should follow when embarking upon this type of discussion.
The aim of this new legislation is to enable employers to have confidential discussions with their staff about potential departures at an early stage, encouraging a more open and flexible culture within the workplace.
Prior to the introduction of this legislation, employers were (and indeed still are) able to have ‘off the record’ conversations with employees using the ‘without prejudice’ rule. However, crucially, such a conversation will only attract without prejudice protection if it takes place with a view to settling an existing dispute with an employee. Usually, an offer of settlement made in these circumstances will also include an additional ‘sweetener’ for an employee to incentivise them to enter into the agreement.
However, in practice, the requirement for there to be a dispute can lead to problems. An employer who wishes to try to negotiate an exit with an employee will often need to wait until a dispute has arisen, engineer a dispute, or more commonly will take the plunge and do it anyway, knowing that there is a significant risk that if negotiations fall apart, it can be openly referred to.
The requirement for there to be a dispute can also often mean that by the time the conversation takes place the employment relationship has deteriorated, and this can lead to an uncomfortable and difficult situation for all involved.
While the need to offer an additional financial incentive will still be a feature, this new legislation potentially avoids the need to jump through the previous hoops. However, there are some important limitations.
Unfair dismissal claims
The discussions will only be inadmissible in unfair dismissal claims. They can be referred to in other types of claims including claims of discrimination. In practice this could be a significant limitation. Take retirement. Now that the default retirement age has been repealed, employers may wish to take advantage of this new legislation to have frank conversations with older employees about their plans for retirement. However, any conversation about retirement inevitably involves the possibility of an age discrimination claim. An employer embarking upon such a conversation would therefore still run the risk that the conversation could be admissible in any subsequent proceedings.
The new legislation also provides that the discussions will be admissible if there is ‘improper behaviour’.
The Acas Code provides further guidance on what might be regarded as improper behaviour, but this list is not exhaustive. It includes all forms of harassment, bullying and intimidation, including offensive words or aggressive behaviour, physical assault or the threat of physical assault and other criminal behaviour, all forms of victimisation, discrimination and putting undue pressure on a party.
The final exception regarding undue pressure is potentially quite broad and open to interpretation. However, helpfully, the Acas Code also provides a couple of examples of what might constitute undue pressure. These examples include not giving an employee enough time to consider the proposal or threatening the employee with dismissal if the settlement proposal is rejected. Clearly therefore all conversations around settlement need to be presented as an option for consideration rather than an ultimatum.
So how does it work?
The Acas Code provides that a settlement proposal can be made in writing or orally, however the settlement agreement itself needs to be in writing and the employee needs to take legal advice, as was the case with compromise agreements.
Taking into account the guidance given in the Acas Code, we recommend an employer proceeds as follows:
– Approach the employee and explain that you want to have a meeting about terminating employment on mutually agreeable terms under a settlement agreement. Offer the employee the right to be accompanied to this meeting.
– Hold the meeting with the employee and their representative (if any). Explain that you want to make a proposal to terminate employment on mutually agreed terms using a settlement agreement. There is no requirement for an employer to give a reason but the Acas Code says it may be helpful to do so.
– Give the employee a letter summarising the position and the next steps and enclosing a copy of the proposed settlement agreement for them to consider. The Acas Code suggests that a minimum of 10 calendar days will generally be a reasonable amount of time.
– If the employee says they are not interested in settlement discussions, leave it there. Provided the requirements have been met, the employee will not be able to refer to the conversation. If the offer was made in the context of an impending internal process (for example capability, disciplinary or redundancy) proceed with that process as planned.
– If the employee is interested, then you can enter into more detailed negotiations about the terms of the settlement with a view to agreeing an exit if terms can be agreed.
Employers proposing to embark on these types of discussions need to think carefully before they do so and assess the risks in each case. However, in appropriate circumstances, the ability to have an open and frank discussion at an early stage could prove extremely valuable, saving employers time and money and leading to amicable resolutions.