Protected Discussions and the Without Prejudice Rule
The “Without Prejudice" Rule
Where statements are made by an employer to reach an agreed severance package and such dialogue is made in a genuine attempt to settle an employment dispute, such conversations are inadmissible in the Employment Tribunal because the "without prejudice" rule applies.
This means that if an employee has raised a grievance, or a performance management process has been commenced or a redundancy consultation exercise has been started, then this in law is deemed a “dispute” and, as such, if an employer makes a genuine termination offer and clearly states that the offer is “off record” then the without prejudice rule will apply to such settlement discussions.
Such discussions have their limitations: if an offer is made which clearly shows that it is a “take it or you are out approach” this is not a genuine attempt to settle a dispute. The employer has exposed itself to show that termination is inevitable and pre-determined and therefore such dialogue is not off record and is considered “open” for the Employment Tribunal to see.
A less stringent regime is known as protected discussions. This is appropriate when an employer wants to propose a termination of employment on mutually agreed terms before there is any legal dispute with the employee. This may be for a variety of reasons, but it is often because of perceived shortcomings in the employee's performance, organisational changes, or simply a clash of personalities. Rather than go through capability, redundancy or disciplinary proceedings, with the risk of subsequent litigation, it is often seen as commercially beneficial to start confidential exit negotiations with a view to a financial settlement and a discussion of a potential exit, long before anything as concrete as a dispute has arisen.
In 2013 the government introduced a new statutory framework known as section 111A(1) of the Employment Rights Act 1996 (ERA 1996) discussions also known as “pre-termination negotiations" or "protected conversations". They are intended to make it easier for employers to initiate settlement conversations with employees with less risk of those conversations being admissible in subsequent tribunal proceedings.
A protected discussion is an off-the-record conversation which is then followed up in writing complying with various legislative obligations. It allows an employer to have a frank discussion with the employee and not expose itself to an unfair dismissal finding. The employer needs to not put pressure on the employee to accept any offer, but it is an option that should be considered when a pragmatic approach may be possible to amicably terminate an employee’s employment. It is good practice for the employer to highlight that settlement discussions are expected to be inadmissible in tribunal proceedings and that they will have no bearing on any subsequent performance management or disciplinary procedures if settlement discussions are ultimately unsuccessful.
It should be remembered that such discussions have their limitations: such discussions are only inadmissible with reference to any unfair dismissal allegations and do not cover discussions to settle discrimination allegations. Discussions are also not protected if an employee can show “improper behaviour” on the employer’s part.
A Settlement Agreement
Once a termination agreement in principle is reached, it is worth considering clarifying the terms of the agreement into a settlement agreement. Its purpose is to provide certainty for the employer that in exchange for an enhanced payment no claims will be pursued in the employment tribunal and all legal rights are duly waived.
Disclaimer: This article does not contain a full statement of the law and it does not constitute legal advice. Please contact the Employment Law Team on 020 3743 0600 if you have any questions about the information set out above.