Settlement Agreements - DAY 1 of 3 - ‘’Without Prejudice’’ Discussions

Bob Sinclair has been employed for 3 years as a Sales Executive. The relationship was great. Bob was very enthusiastic and 100% committed to his job. A year ago, you noticed a change in his behaviour, his attitude to work and his failure to meet targets. This was unexpected but this decline carried on throughout the year. Meetings were arranged to try and understand what is going on and what, if anything, the company can do to help. However, Bob showed no interest and was not willing to communicate. It is now December 2017 and you feel like he can’t work here anymore as Bob is not meeting the business needs. What are your options? If you want to end the relationship, one option would be to have a ‘’without prejudice’’ discussion with the employee to end the employment by mutual agreement by way of a settlement Agreement. You call Bob in for a ‘without prejudice’ meeting today to try to come to a conclusion on the matter and negotiate an exit plan. Here is what you need to know about ‘without prejudice’ discussions: Are such discussions admissible in court? Since 29th July 2013, generally, pre-termination negotiations cannot be referred to in evidence in an ordinary unfair dismissal claim. "Pre-termination negotiations" is defined in the Employment Rights Act 1996 as "any offer made or discussions held, before the termination of the employment in question, with a view to it being terminated on terms agreed between the employer and the employee". This means that such discussions are generally ‘off the record’ and the information is treated as confidential. This is known as the ‘inadmissibility rule’. The inadmissible rule is designed to give employers greater protection when offering settlement agreements outside the context of litigation. However, employers need to be aware that there are some significant limitations on when the negotiations will be treated as confidential. Where negotiations are not protected by confidentiality, they will become admissible in any future dispute before an employment tribunal. Only ordinary unfair dismissal The inadmissibility rule only applies to ordinary unfair dismissal claims. This excludes cases in which the claimant is alleging that the dismissal was for one of the automatically unfair reasons, for example, whistleblowing or health and safety. It also does not cover proceedings for other claims such as discrimination or breach of contract. Improper behaviour The rule does not apply if there has been “improper behaviour”. The Employment Rights Act 1996 gives an alarmingly wide definition of “improper behaviour”, being “in relation to anything said or done which in the tribunal’s opinion was improper, or was connected with improper behaviour, the inadmissibility rule applies only to the extent that the tribunal considers just”. It seems that what constitutes “improper behaviour” is ultimately a matter for an employment tribunal to decide on the facts and circumstances of each case, but may be behaviour such as physical assault and bullying. The wording suggests that “improper behaviour” does not make the whole course of negotiations admissible. It seems that the employment tribunal can only relax the rule in relation to the “improper behaviour” and the evidence that came to light because of the said behaviour. However, this position is unclear at present. Employers may therefore rightly be wary of relying on this rule as an employee may submit numerous different claims to the employment tribunal which may mean that certain information contained in pre-termination negotiations is admissible. It is therefore advisable for employers to remember the limitations of the inadmissibility rule and to exercise caution while engaging in pre-termination negotiations. At the end of the meeting, you and Bob come to an agreement to end the employment relationship by way of a settlement agreement. Settlement Agreements are very useful tools to an employer. They effectively draw a line under the employment relationship and therefore provide comfort to you that your employee will not bring any employment related claims against you. However, can you negotiate a good settlement agreement on behalf of the company? Stay tuned for DAY 2 of 3 where we go on to discuss the actual settlement agreement.