On 29 July 2013, new legislation came into force (section 111A of the Employment Rights Act 1996) which gives extra protection - against litigation - to employers who wish to hold confidential pre-termination meetings with employees (discussions about terminating employment on agreed terms). The new rules apply in limited circumstances and only to potential claims for ordinary unfair dismissal.
Essentially, the extra protection is that there does not have to be a ‘dispute’ for an employer or an employee to enter into ‘protected’ pre-termination discussions, provided there is a genuine attempt, by both parties, to reach a settlement.
Previously, in certain circumstances, an employer could use protected ‘without prejudice’ discussions to settle a matter, but only if the issues to be settled involved a dispute. This new regime co-exists with the protection of confidentially already afforded by ‘without prejudice’ discussions.
Potential unfair dismissal claims only
The new regime (if applied correctly in accordance with the ACAS Code of Practice on Settlement Agreements) protects employers against claims of ‘ordinary unfair dismissal only’. It does not protect employers against claims of discrimination (for example, whistle-blowing/race discrimination); nor automatic unfair dismissal on protected grounds such as race/sex/whistle blowing; nor breach of contract claims.
Further, the new regime does not protect employers from claims where there has been any ‘improper behaviour’. The ACAS Code gives examples of ‘improper behaviour’ as ‘harassment, bullying, intimidation, victimisation, physical assault and other criminal behaviour, discrimination on all protected grounds, pressurising a party to sign an agreement, not giving reasonable time for consideration’. The Employment Tribunal has discretion however, as to whether any pre-terminations negotiations are admissible (disclosable) if there has been improper behaviour.
So in what situations can you use the new regime?
The ACAS Guide on Settlement Agreements gives the following examples:
- For staff performance – eg where a staff member is struggling to perform and is unhappy;
- For staff personality clashes where one staff member wishes to leave (although you would need to check there are no allegations from one staff member to the other that need investigation or could amount to bullying or harassment).
It might be difficult to decide whether the new regime applies because of any potential complaints/issues other than an unfair dismissal claim and, if in doubt, seek advice or do not use it.
Practical tips for employers
Employers will need to be able to readily justify the basis for initiating pre-termination negotiations and apply a consistent approach in accordance with the ACAS Code of Practice on Settlement Agreements and the ACAS Guide on Settlement Agreements.
How to avoid the pitfalls:
Before initiating pre-termination negotiations check the following:
- The reason for conducting pre-termination negotiations – eg is it limited to performance, or is there a disciplinary issue?
- Whether it is clear that there is no unlawful victimisation or unlawful discrimination in offering a settlement in the first place.
- The employee’s personal file for any grievance issues or issues other than dismissal.
- Is a settlement agreement the best way to deal with the issue, or is say a formal grievance or mediation more appropriate?
- The implications, if a settlement cannot be reached for this employee and the wider workforce;
Summary of suggested approach by ACAS for initiating pre-termination negotiations:
1. The employer approaches the employee to propose a settlement agreement.
The proposal can be:
- Made at any stage of the employment relationship (employers will note that proposals can also be made by employees)
- Communicated to the employee in person, writing or orally. If not communicated in writing, the settlement agreement must ultimately be put in writing in order for it to be legally binding.
The employer will need to explain the reasons for the proposal, for example concerns about the employee’s performance
2. A meeting is held between the employer and employee to discuss the settlement proposals.
- Although it is not a legal entitlement for employees to be accompanied at such meetings, it is advisable, and considered good practice in accordance with the ACAS Code, to allow them to be accompanied by a work colleague, trade union official or a trade union representative.
3. Parties are given a reasonable period of time to consider the proposed settlement agreement.
- As a general rule, a minimum of 10 calendar days should be allowed to consider the proposed formal written terms of a settlement agreement and to receive independent advice.
4. A settlement agreement must comply with statutory requirements
What happens if a settlement agreement cannot be agreed by the parties or an employee is not interested in engaging in pre-termination negotiations?
In such circumstances, depending on the nature of the dispute or problem, the employer should seek resolution through the appropriate performance, disciplinary or grievance process. In doing so, the employee will not be able to rely on the offer or attempted settlement agreement as part of this process.
In any event, employers must follow a fair process and the principles set out in the ACAS disciplinary and grievance Codes of Practice. Failure to do so may constitute grounds for an employee to bring a potential claim for unfair dismissal.
In addition, at all times consistent practices and procedures need to be followed and applied consistently across the organisation to avoid allegations of inconsistent treatment.
- Jean Sapeta is head of employment at specialist medical solicitors Hempsons She is also Medeconomics' employment law expert. For details on how to ask Jean your questions, click here.