Confidential Termination Negotiations

Following a consultation exercise in Autumn 2012, the Department for Business Innovation & Skills (BIS) introduced legislation which, from this Summer, will enable employers and employees to engage in confidential settlement negotiations before termination of employment. As a consequence, both parties should be able to negotiate freely without fear that the anything discussed (such as the value of offers made but declined) may subsequently be raised in any subsequent ordinary unfair dismissal claim at an employment tribunal. Previously, this type of legal privilege only extended to “without prejudice” discussions taking place after a dispute had already arisen.

Sounds good, but what’s the catch?

Employment tribunals will have a limited discretion to take into account anything said or done in negotiations which, in the tribunal’s opinion, was improper and which it would be unjust to exclude. As such, the protection of the new rules could be lost because of the way pre-termination settlement negotiation are conducted. Also, the protection will only extend to ‘ordinary’ unfair dismissal proceedings, so will not cover claims arising from ‘automatically’ unfair dismissals, such as dismissal for reasons connected with pregnancy, for making a protected disclosure or for participation in trade union activities.

So how do I ensure that pre-termination discussions will be protected?

Following another consultation in February, Acas has published its response document, which includes a revised statutory Code of Practice on Settlement Agreements (“the Code”). A non-statutory guidance document will also be published alongside the Code to aid understanding of the new legal provisions. Failure to follow the Code will not, in itself, make an employer liable to tribunal proceedings. However, employment tribunals will take the Code into account and so compliance will be an important factor when considering whether there has been any improper conduct. In particular, the Code sets out some points of good practice for employers to follow, including:

- an explanation of the test of “improper behaviour”, as well as illustrative examples of such behaviour, such as victimisation and harassment;
- allowing employees to be accompanied at settlement agreement discussions;
- template settlement agreements and information on what parties need to so to make settlement agreements legally valid (template letters will also be included in the non-statutory guidance);
- allowing ten calendar days as the minimum time period to consider the formal written offer on which independent advice must be obtained; and
- that while an initial offer may be made orally, the final agreement must be in writing.

Katherine Sadler-Smith, Training & Know-How Lawyer, Osborne Clarke

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