UK: Pre-Termination Negotiations

Last Updated: 12 April 2013
Article by Denise Owusu-Ansah

The idea of the 'protected conversation' between employer and employee has been shelved in favour of proposals for pre-termination negotiations.

The Government originally proposed the idea of the 'protected conversation' as a means by which, as the Prime Minister put it, 'a boss and an employee could feel able to sit down together and have a frank conversation at either's request'. The idea was that matters such as an employee's performance or their future plans for retirement could be addressed behind closed doors without the employer being at risk of the conversation being adduced as evidence in any subsequent litigation.

However, the proposal that has been included in the Enterprise and Regulatory Reform Bill (the ERRB), which is currently making its way through the House of Lords, is far narrower in scope than the original idea. The concept of the 'protected conversation' has been dropped and instead, the ERRB creates the concept of 'pre-termination negotiations'. This simply provides that (subject to some exceptions) an offer made or discussion held with an employee with a view to terminating employment on terms to be agreed cannot be taken into account as evidence in a subsequent unfair dismissal claim.

Extending the 'without prejudice' rule?

Most employers are familiar with the 'without prejudice' rule, which is often used by employers to start discussions proposing the termination of employment of an employee on the basis that the discussion will be inadmissible as evidence. However, for the 'without prejudice' rule to apply there must be a genuine attempt to resolve an existing dispute between the parties. This requirement for the 'without prejudice' conversation to resolve an existing dispute has created uncertainty for employers about whether such conversations may result in an employee challenging their validity.

The new pre-termination negotiations will seemingly extend the 'without prejudice' rule since they can take place where there is no actual dispute with the employee. This may bring some welcome certainty for employers.

The limits of the protection

The provision in the ERRB, as it stands, will only prevent what is stated in the settlement offer, or during discussions about it, from being admissible in ordinary unfair dismissal proceedings. This means that the fact and content of such offer or discussions would be fully disclosable in any other case, including:

  • automatically unfair dismissal (for example, for asserting a statutory right);
  • discrimination or public interest disclosure; and
  • breach of contract (for example, a claim for repudiatory breach of contract as a result of suggesting that an employee resign).

This would potentially mean that the new proposals could not be relied upon to allow for 'frank conversations' about retirement if these might involve direct age discrimination or age-related harassment, as the protection would then be lost. Any conversation that has the potential to include discriminatory matters, for example, a conversation with a woman on maternity leave suggesting that she should not return to work, would similarly not fall within the scope of the protection under the new proposals.

The new proposals are therefore likely to be of most use in straightforward dismissal situations, including cases of persistent misconduct or cases of poor performance, where there is no obvious dispute with the employee and where managing the issue is likely to be time consuming and difficult.

Improper conduct – a recipe for litigation?

The new proposals provide that anything 'improper' will still be admissible as evidence. This provides employment tribunals with the discretion to take account of a conversation in which, in the Tribunal's view, something was said or done that was improper or was 'connected with improper behaviour', if it considers it just to do so.

The legislation is silent about what might amount to 'improper' conduct, but the scope of what a tribunal might consider 'improper' is likely to be very wide. Unambiguous improper conduct will cover matters such as discrimination, blackmail or criminal activity, but the concept is likely to extend to any attempt to threaten or bully an employee. It seems inevitable that this will be an area that will give rise to litigation and that, ultimately, case law will establish what constitutes impropriety.

How will they work in practice?

Pre-termination negotiations are expected to come into force this summer. However, it is not yet clear how they will work in practice. In its consultation paper entitled 'Ending the Employment Relationship', published in September, the government proposed principles including:

  • either party can propose settlement;
  • the reason for being offered the settlement should be made clear;
  • where an individual refuses settlement, the employer must go through a fair process before deciding whether to terminate the relationship; and
  • individuals should be given a clear, reasonable period of time to respond. In addition to these principles, the Government has proposed:
  • a new statutory Acas Code of Practice on settlement agreements (including specific examples of what may constitute improper conduct, an optional model settlement agreement and guidance notes); and
  • optional template letters that employers can use to propose settlement terms in a variety of situations.

Consultation on the draft Code of Practice will close on 9 April 2013. It remains to be seen whether the new proposals will make settlement easier, but the indication from the current wording is that the new arrangements are unlikely to give employers the certainty that they need if this development is to have any meaningful effect. Rather it looks like a recipe for a lot of litigation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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