There are times when dealing with employee issues can become:
These are the times when reaching an agreement with an employee and making a payment to resolve the matter can often be the best way to remove stress, reduce risk, and avoid unnecessary difficulty.
I understand that it can be a ‘bitter pill to swallow’ in some cases, but paying an employee a sum of money to leave the business and agree not to pursue matters further can often be the best outcome for your business.
Fortunately for employers, there are a few ways in which settlement options can be explored legitimately without the risk of those discussions coming back to haunt you later.
The general legal position is that genuine attempts to settle a dispute can take place “off the record”, meaning that one party cannot later refer to those discussions as evidence of the other party’s “guilt”.
This is particularly helpful for employers where there is already a dispute to settle. For example, if an employee raises a grievance about their treatment at work, or they are in the middle of disciplinary proceedings, it is likely that settlement discussions would be covered by the general Without Prejudice rules.
The Without Prejudice principle means that, where you are attempting to resolve a genuine existing legal dispute, those discussions can generally only be referred to in the Employment Tribunal when the Tribunal considers the issue of costs after the case has been decided. This is why correspondence is often headed “Without Prejudice Save As to Costs.”
If the successful party made a reasonable settlement offer earlier in the proceedings which was rejected, they may bring that offer to the Tribunal’s attention and argue that they should recover their costs from the date the offer was made.
Please note that, whilst a party can apply for costs in the Employment Tribunal, costs do not follow the event as they often do in the civil courts. This means that the successful party does not automatically recover the legal costs they have incurred. Costs awards in the Employment Tribunal are relatively rare, which is one of the reasons why settlement can be such an attractive alternative for both parties.
In 2013, the law changed with the introduction of Protected Conversations. The intention was to allow employers to have discussions with employees to resolve issues before they develop into formal disputes.
Prior to this change, employers often avoided having settlement discussions with employees whilst they remained employed, fearing that the conversation could later be used against them if disciplinary action or dismissal followed.
Employers can now have a protected conversation and, provided they follow certain guidelines (set out below), the conversation cannot generally be referred to in any subsequent claim for unfair dismissal.
Please note that the rules regarding protected conversations apply only to unfair dismissal claims and not to other claims, such as discrimination. In such cases, employers would need to rely on the general Without Prejudice principles described above.
It is also important to note that any improper behaviour during the discussions can still be referred to in subsequent Employment Tribunal proceedings. It is therefore essential to conduct the discussions fairly, remain professional, and stick to the key points. You should make it clear that the employee’s decision on the offer will not influence any future decisions or action taken by the employer.
The employee should understand that they are free to consider the offer and reject it without any adverse consequences.
I recommend following the process below when holding a Protected Conversation.
An employee does not have a legal right to be accompanied at this meeting. However, you may decide that allowing them to be accompanied by an appropriate person would assist discussions. Many employers prefer settlement discussions to remain confidential and, for this reason, do not permit employees to be accompanied by colleagues.
Performance
You do not believe they are currently performing to the required standard or are likely to achieve the required standard within a reasonable timeframe. Rather than requiring them to go through what could be a lengthy and stressful performance management process, you wish to offer them the opportunity to leave the business now in return for a settlement payment.
You cannot, of course, predict the outcome of the performance improvement process, but if they fail to meet the required standards it is possible that they could ultimately be dismissed within the next three to six months.
Redundancy
You have decided that redundancies are likely to be required within their department. Although no consultation or selection process has yet taken place, you believe that, based on the likely selection criteria, they may be selected for redundancy. Rather than requiring them to go through the stress of a redundancy consultation process, you wish to offer them the opportunity to leave now in return for an enhanced redundancy payment.
You cannot predict the outcome of a fair consultation and selection process, but if they are ultimately selected, they would receive only their statutory (or contractual) redundancy entitlement.
I recommend avoiding lengthy discussions. Explain that the purpose of the offer is to avoid the need for detailed debate at this stage and that you do not intend to discuss the underlying issues during this meeting.
At this stage, you may provide either:
If you provide only the summary, you may wish to ask the employee whether they are prepared to accept the offer in principle before instructing solicitors to prepare the full Settlement Agreement.
Employees can only validly settle their statutory employment claims either through ACAS (by way of a COT3) or by entering into a Settlement Agreement.
The law recognises that employees are generally in a weaker bargaining position than employers. To ensure that employees are not pressured into waiving valuable legal rights without appropriate protection, Settlement Agreements must contain certain statutory provisions and employees must receive independent legal advice before signing.
Employers should ensure that any Settlement Agreement is properly drafted and legally enforceable. Otherwise, they may pay compensation without obtaining the protection they intended.
Typical clauses within a Settlement Agreement include:
As set out above, Settlement Agreements provide certainty and peace of mind by bringing disputes to a conclusion without the need for lengthy litigation.
We are currently experiencing significant delays within the Employment Tribunal system, with many claims now taking around two years to conclude. In some regions, claims may take up to three years before reaching a final hearing.
Reaching a mutually agreed settlement can therefore avoid years of uncertainty, stress, management time and legal expense, allowing both parties to move forward sooner.
If you require any further information or assistance with a settlement agreement or protected conversation please contact our office on 01983 897003.
Appointments are available by telephone or via video call, so no matter where you are in England or Wales we can assist you.
The information contained in this blog post is provided for guidance and is a snapshot of the law at the time it is written. It is provided for your information only and should not be used as a substitute for obtaining legal advice that it specific to your particular circumstances.
The guidance should not be relied upon in any decision making process. It is strongly recommended that you seek advice before taking action.
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