Playing Russian roulette with protected conversations

Most employers will be familiar with the ‘without prejudice’ rule whereby an employer (or an employee) can make a settlement offer/enter into settlement discussions ‘off the record’ and in confidence without any statement or offer subsequently being presented in court as evidence of admissions against the party who made the offer. However, settlement discussions are only protected by the without prejudice rule, and inadmissible in court, in respect of discussions which are a genuine attempt to settle an existing dispute.

Without prejudice negotiations
The requirement of a pre-existing dispute means that unless there is an actual dispute in place (in respect of which the parties have already contemplated litigation if agreement cannot be reached), a settlement offer will not be protected by the without prejudice rule. In other words, if a settlement offer is made without there being a pre-existing dispute between the parties, then the settlement discussions will not be regarded as confidential and can be used in court as evidence of admission of wrongdoing. In particular, there will not be a pre-existing dispute if the employer convenes a meeting with the employee without initiating a disciplinary or capability process and offers a sum of money for the employee to leave amicably.

Protected conversations…
To enable employer and employee to have such pre-termination discussions without the employee being able to subsequently argue at the Employment Tribunal that the employer intended to dismiss him without following due process and that therefore any dismissal is unfair, Section 14 of the Enterprise and Regulatory Reform Act 2013 inserts a new section 111A into the Employment Rights Act 1996 (ERA 1996)The idea is to allow more flexibility when it comes to the use of confidential discussions as a way of ending the employment relationship.

Section 111A, which came into force on 29 July 2013, provides that, as far as unfair dismissal claims are concerned, any pre-termination discussions will not be admissible in court even if the discussions took place at a time when there was no pre-existing dispute between the parties. Section 111A will run alongside the without prejudice rule and will in effect simply extend the scope of the without prejudice rule – although only in respect of unfair dismissal claims.

On the face of it, section 111A therefore seems to offer greater protection for employers who wish to enter into settlement discussions, rather than start a dismissal procedure. However, since section 111A offers confidentiality protection in respect of unfair dismissal claims only employers will have to be very careful and assess the risk of the employee raising other types of claims (such as a discrimination claim) on a case-by-case basis.

…not so protected…
Employers who wish to rely on section 111A should therefore carefully consider if there are any other claims that the employee may be able to bring in respect of the decision to dismiss. We would advise that employers keep a record of the reason for proposing to terminate the employment as such paper trail could be critical in defending a subsequent claim for discrimination. Employers should carefully prepare for and structure pre-termination negotiations under section 111A to minimise the risk that the negotiations may provide the employee with evidence which can be used in other proceedings against the employer.

Employers should also beware that some employees may simply refuse to accept an early settlement offer and may instead seek to argue that the employer’s proposal to terminate the employment relationship amounts to a breach of contract (breach of the implied duty of mutual trust and confidence).

Accordingly, although the intentions behind Section 111A to encourage amicable departures and avoid ‘red tape’ are good, the use of Section 111A by employers seem to carry with it a degree of ‘Russian roulette’ as it will be very hard to assess whether an employee is likely to bring a claim outside the Section 111A scope (such as a claim for discrimination). This will be of particular concern to larger organisations where the person making the decision to dismiss is not always involved in the day-to-day management of the employee.

The material contained in this newsletter is provided for general purposes only and does not constitute legal or other professional advice. Appropriate legal advice should be sought for specific circumstances and before action is taken.

© , August 2013

For further information please contact The Employment Team