“I have an employee whose attitude and performance is poor. Rather than taking the employee through a capability procedure can I explore with the employee whether he/she would be open to mutually agreed termination by agreeing a settlement package with them? Is it safe for me to initiate settlement discussions with the employee in this instance?"
Section 111A of the Employment Rights Act 1996 provides that any evidence of pre-termination negotiations is inadmissible as evidence before a Tribunal in any unfair dismissal claim. These discussions are often described as ‘protected conversations’.
For example, you may offer a settlement agreement to an employee who has been the subject of previous disciplinary proceedings and whose behaviour has not improved. When the employee receives the offer he/she may immediately resign and seek to claim unfair constructive dismissal on the basis that the offer breached the implied term of mutual trust and confidence. If S111A applies the employee will not be able to refer to the discussion in which the offer was made before the Tribunal.
S111A protection only applies where the employee is complaining of ‘ordinary’ unfair dismissal. The protection of S111A does not apply to claims for automatic unfair dismissal e.g. where an employee alleges that dismissal occurred for a reason relating to their pregnancy or trade union membership. In addition, there is no S111A protection for any other claim e.g. breach of contract or discrimination.
ACAS have published a helpful guide on settlement agreements including template letters that can be used to initiate settlement discussions under S111A:-
The protection in S111A will not apply to its full extent where there is some improper behaviour on the part of the employer or the employee in relation to the settlement negotiations. This includes harassment, bullying and intimidation, including the use of offensive words or aggressive behaviour, criminal behaviour e.g. threat of physical assault, victimisation, discrimination and putting undue pressure on a party (e.g. not giving an employee a reasonable period of time to consider any proposed settlement offer, an employer saying before any form of disciplinary process has commenced that the employee will be dismissed if he/she rejects a settlement proposal, or an employee threatening to undermine an organisation’s public reputation if it does not sign a settlement agreement unless it is a whistleblowing case).
S111A supplements the ‘without prejudice’ rule which by contrast covers any type of claim and which provides that any discussion between an employee and employee entered into on a ‘without prejudice’ basis to settle an existing employment dispute cannot be disclosed in any subsequent legal proceedings.
If in doubt it is always recommended that you use the advice line and take employment law advice around any settlement discussions.
Motor Industry Legal Services
Motor Industry Legal Services (MILS Solicitors) provides fully comprehensive legal advice and representation to UK motor retailers for one annual fee. It is the only law firm in the UK which specialises in motor law and motor trade law. MILS currently advises over 1,000 individual businesses within the sector as well as the Retail Motor Industry Federation (RMI) and its members.