Settlement Agreements, Protected Conversations

In 2013 ‘Protected conversations’ were introduced under the Employment Rights Act s 111A to allow employers and employees to have confidential discussions about ending an employment contract where there is no dispute about the termination.  Protected conversations do have limitations as discussions will not be treated confidentially in cases of automatically unfair dismissal, breach of contract or discrimination.   In cases where there is an existing legal dispute, the ‘without prejudice’ rule may apply to prevent statements made being used in court.  The following 5 points should be considered when conducting ‘protected conversations.

1. Different types of discussions will protect different types of claim.  The ‘without prejudice’ rule applies to a wider range of claims than discussions under the ‘protected conversation’ rule

2. The ‘without prejudice’ rule may protect pre-termination discussions, but will only apply if there is a genuine attempt to resolve an existing dispute

3. In cases of unfair dismissal, even if both parties wish to disclose contents of discussions, confidentiality cannot be waived under the ‘protected conversation’ rules, unless either party has engaged in ‘improper behaviour’ such as harassment, intimidation, bullying or undue pressure

4. The details and existence of a ‘protected conversation’ discussion may be protected and inadmissible as evidence in relation to an ordinary unfair dismissal claim

5. In cases where there is an unfair dismissal claim together with a discrimination claim, discussions in relation to the unfair dismissal claim must be ignored by tribunals, but not the discrimination claim

Relations between employer and employee can become problematic for many reasons and these issues are usually best resolved through straightforward and honest conversations.  However, settlement agreements (formally known as Compromise Agreements) are another tool which can be used to deal with workplace issues, and are commonly used to help end an employment relationship in a way which is acceptable to both parties or to reach an agreed and final conclusion to a workplace dispute or issue which does not result in an Employment Tribunal.

There are a number of areas an employer should consider before using settlement agreements, such as:

Is a settlement agreement the best way to deal with the issue? Use of this process should not take the place of good management.

How will you approach the admissibility provisions with your employee? You are required to inform your employee that the “without prejudice” principle and the admissibility provisions as set out in the Employment Rights Act 1996 prevents the conversation from being put before an employment tribunal or court, providing certain criteria are met.

Are you going to ask the employee if they would like to be accompanied at any such meeting? Accompaniment is not a legal requirement for settlement discussions, but ACAS consider it to be best practice.

Is it clear that there is no unlawful discrimination or victimisation involved in offering a settlement agreement in the circumstances? Settlement conversations which have arisen because of a dispute which is discriminatory or which end up including issues of discrimination will not be given the protection of the “without prejudice” principle and may end up being heard at tribunal or court.

Are you aware of all the legal requirements for a settlement agreement to be valid? All of the following conditions must be met:

• The agreement must be in writing

• The agreement must relate to a particular complaint or proceedings

• The employee must have received advice from a relevant independent adviser on the terms and effect of the proposed agreement and its effect on the employee’s ability to pursue that complaint or proceedings before an employment tribunal or other court

• The independent adviser must have a current contract of insurance or professional indemnity insurance covering the risk of a claim by the employee in respect of loss arising from that advice

• The agreement must identify the adviser

• The agreement must state that the statutory provisions which set out the above conditions regulating the validity of the settlement agreement have been satisfied

Have you considered what might be a realistic and reasonable timescale for any discussions and negotiations? Employees should be given a minimum of ten days to consider the written settlement offer and each case should be considered on its own merits. Solve can draft the settlement agreement for you, support you through the process and support with negotiations. Please contact Solve for support on 0131 300 0433.

As of 29 July 2013 it became possible for employers to have “confidential” pre termination negotiations with employees whom there are not existing disputes with. This statutory provision (enacted by the Enterprise and Regulatory Reform Bill) was brought in to facilitate frank discussion between employer and employee, however, it may cause more headaches for employers than it addresses.

The main issue with this provision is that it only prevents the disclosure of discussions in Unfair Dismissal claims. The discussions could still be referenced in discrimination claims or dismissals that fall under the category of “automatically unfair” dismissals, such as ones involving whistleblowing. Pre termination discussions will also be admissible in Unfair Dismissal claims where it is purported that there has been “improper behaviour” on the part of the employer. What constitutes “improper behaviour” is not covered in the legislation so we will need to look to future case law for guidance.

In the meantime ACAS have published a Code of Practice which is not statute but can be viewed as best practice.  For instance, they suggest ten days a “reasonable” time to consider a settlement proposal.

Employers looking to utilise this new provision should seek expert employee relations advice first. In particular, they will need to be satisfied that there is no grounds for a discrimination claim, and that having followed ACAS’ Code of Practice they could not be considered culpable of “improper behaviour”.

If agreement is reached the negotiations will be tied up in “Settlement Agreements”, which employees will have to be independently advised on by a solicitor. It should be noted that the Employers (as with Compromise Agreements) will foot the cost of this independent advice.

Vince Cable’s long championed protected conversations have usefully added to the tools at an employer’s disposal, however, even the most well intentioned employers should seek advice before pursuing this course of action.