“Protected conversations” – proceed with absolute caution…..!
“Protected conversations” or, more correctly, “pre-termination negotiations” were championed by Vince Cable, the then Secretary of State for Business, Innovation and Skills, and introduced into the law as Section 111A of the Employment Rights Act on 29 July 2013. From that date, it became possible for employers to hold confidential, “without prejudice” conversations with employees with whom they did not have existing disputes, with a view to agreeing a mutual termination of their employment. As with any new law, it was difficult even for employment law commentators to know just how much - or little - impact this introduction would have, in particular, how much of an uptake there would be by employers.
In fact, protected conversations are now a very definite part of the employment law landscape. While not all employers are aware of the possibility of commencing pre-termination negotiations with individuals within their work force, it is now a mainstay in any discussion.
When should employers use them?
”Protected conversations”, or “pre-termination negotiations” as they are sometimes called, provide both employers and employees with an off the record forum for confidential discussions to explore the possibility of parting ways on mutually agreeable terms.
What are protected conversations?
In summary, the protected conversations regime provides that evidence relating to protected conversations/pre-termination negotiations will be inadmissible in unfair dismissal proceedings before employment tribunals. Effectively, this is a variation and extension of the existing without prejudice principle, the key difference being that there is no need for the parties to be in dispute before a protected conversation can be initiated.
The protection is also subject to the concept of “improper behaviour”. That is, if either party engages in improper behaviour, evidence of protected conversations will be inadmissible to the extent that the tribunal considers this just. The ACAS Code of Practice on Settlement Agreements (“ACAS Code”) provides a wide-ranging non-exhaustive list of examples that fall into this category.
When might a “protected conversation” take place?
Perhaps unsurprisingly, employers are often nervous about approaching employees to have a protected conversation if there is any danger of the individual alleging any form of discrimination or whistleblowing – claims that are not covered by the inadmissibility protection. As a result, protected conversations generally take place with senior level employees in circumstances in which it is strongly felt that the individual in question will be pragmatic and amicable exit terms are likely to be agreed quickly.
Another category of individual with whom the protected conversation route is likely to be used is where the employee is seen as low risk when it comes to a possible discrimination claim. The circumstances in which this approach is being used is generally where an individual has been with the company for a relatively short period of time (but for more than two years) and is not performing as well as had been hoped. The protected conversation route may help to facilitate a quick exit whilst reducing the risk of an unfair dismissal complaint.
What are the risks?
The concept of improper behaviour also puts employers off using protected conversations. The ACAS Code and accompanying guidance provide examples of what is likely to constitute ‘improper behaviour’, although this is ultimately a point for tribunals to decide. Perhaps the most troubling of the examples given is the risk of putting undue pressure on the other party. This is stated to include not giving a reasonable time for consideration of a settlement offer/agreement, or any statement by the employer that the employee will be dismissed if he/she does not accept the offer being made. This is a very easy trap to fall into, particularly if the employee asks directly what the consequences would be of rejecting an offer.
Employers generally wish to conclude exit terms as soon as possible and it is common to put time limits on offers that are made. This, however, is a dangerous tactic and could lead to accusations of undue pressure, particularly given the statement in the ACAS Code that, as a general rule, ‘employees should be given at least ten days to consider the proposed formal terms of a settlement agreement’. Employers prefer to bring matters to a head and avoid delays, which can cause disquiet in teams.
Once an employee is dismissed there is a clear dispute between the parties and employers can rely on the ‘without prejudice’ rule to protect the content of negotiations, under which they have more freedom to apply time limits on offers and speak more freely.
How are the terms of departure recorded?
Following a protected conversation, the terms of departure should usually be recorded in a formal settlement agreement which is a legally binding contract between the employer and the exiting individual. The purpose of a settlement agreement is to confirm that the employee will not bring claims in the employment tribunal or courts against the employer. This confirmation is usually in exchange for some form of financial compensation. Employers should remember that employees are not obliged to enter into settlement agreements and they do not have to accept the terms which are initially proposed. There is often a period of negotiation between parties before an agreement is reached and this can sometimes be an expensive and time consuming process.
Overall it seems that, although the Government had the right idea when introducing protected conversations, what we have in practice is something that does not deliver the simplicity and flexibility all had hoped for. Employers should therefore exercise caution when using protected conversations as a management tool within their organisations, and consider whether it is preferable to explore ‘without prejudice discussions’ as an alternative route.
How to approach a conversation with potential Settlement Agreements
Employers should be cautious about approaching pre-termination negotiations on the assumption that what is said will be excluded from evidence in an unfair dismissal claim. Fortunately, there is no reason why discussions of this nature need to be conducted in a way that would prejudice a future tribunal hearing. The fact that an employer has offered to negotiate an exit with an employee does not necessarily mean that the employee can resign and claim constructive dismissal or that an eventual dismissal will be unfair.
There are essentially two pitfalls that employers need to avoid.
· The first is conducting the discussion in a way that indicates that the employer has no confidence in the employee's ability to do the job.
· The second is the employer giving the impression that it has already made up its mind and that any performance management or disciplinary procedure will be a sham.
One option for employers is to begin the performance management, disciplinary or redundancy procedure before initiating a conversation about potentially reaching a settlement agreement.
The employer could then suggest an agreed exit package as an alternative to continuing with the procedure. The employee would already be aware that termination is a potential outcome of the procedure and may be more inclined to pursue a settlement. Beginning a formal procedure before holding the conversation about settlement may make it more likely that the conversation would be covered by the ‘without prejudice’ principle, as the employer could argue that there was a pre-existing dispute with the employee.
The employer may decide that it would be preferable to avoid any formal procedure and go straight to a discussion with the employee. Either way, the key for employers is to conduct the conversation in a way that keeps all options open but that allows the conversation to move forward and towards an agreed termination if the employee is open to that possibility.
The opening of such a conversation in a performance case could stress the employer's commitment to making the relationship work and confidence that the appropriate procedures and processes can achieve just that. The employer could ask the employee if they are similarly committed and prepared to engage with the employer to improve the situation. At this point, the employer could raise the possibility of an agreed termination as one option the employee could consider, and take the conversation from there if the employee seems receptive to the idea.
If the issue relates to discipline, the employer could raise a more general point with the employee about their attitude towards the organisation and his/her colleagues and whether or not they see a way forward. Again, the possibility of a settlement could be raised as one option to explore, without any suggestion that dismissal is the likely outcome of the disciplinary process.
The employer should state that the conversation is on a ‘without prejudice’ basis, and that it is covered by s.111A, and should explain what that means. It should ask the employee to agree that the negotiations will be kept confidential, other than from specified people, for example their legal advisers and close family.
Conversations of this nature are probably best conducted by HR professionals rather than line managers. In particular, they should not involve an individual who is likely to be directly involved in the potential disciplinary or performance improvement procedure.
There is no right to be accompanied at a pre-termination negotiation, although the Acas code recommends allowing a companion as ‘good practice’. Where a companion or union representative is already involved in the process it would make sense for any employer to include them in any discussions. Furthermore, the individual carrying out the negotiation may be inclined to take more care over their ‘choice of words’ if there is a companion or representative present, which could help to avoid any suggestion of improper behaviour.
Once the discussions have begun, it would be wise for the employer to set out the basis of its offer in writing. This will allow the employee to take appropriate advice and also give the employer an opportunity to emphasise that no decision has been taken at that stage. The Acas code suggests that, as a general rule, the employer should give the employee a minimum of 10 calendar days to consider the formal terms of a settlement agreement and obtain advice. The appropriate length of time will vary according to the nature of the negotiations taking place and the timetable for any approaching disciplinary hearing or performance review. Written communications should be headed "without prejudice" and "subject to s.111A of the Employment Rights Act 1996".
Following the Negotiations
If the employee does not accept the offer, the employer should continue with its formal disciplinary, performance improvement or redundancy procedure, ensuring that it follows a fair procedure regardless of what has been discussed during the negotiations.
The employer may want to utilise s.111A and argue that its pre-termination negotiations are inadmissible. However, if it adopts the approach set out above, even if the negotiations are admissible it should at least be in a position to defend an unfair dismissal claim founded on those negotiations, on the basis that it acted reasonably. More importantly, this approach should give the employer confidence that, if the conversation were to be used in evidence in a discrimination, breach of contract or automatically unfair dismissal claim, this would not damage its case.
If the employee does accept the offer, the employer should enter into the settlement agreement with the employee, ensuring that they have obtained independent advice on its terms
While “protected conversations” can be criticised as providing the employer with a “get out of jail free” card, they can also benefit the employee in both the long and short run.
Generally speaking, the pre-termination negotiations involve the employer making a financial offer to the employee as compensation for loss of their job and this can constitute weeks or even months’ worth of wages or salary. In addition, it is usually possible to agree satisfactory terms of a reference for the employee as they seek employment elsewhere and both the employer and employee benefit from the confidentiality requirements inherent in any negotiated termination.
Finally, it is usually possible to agree payment in lieu of notice or, alternatively, a period of garden leave, at the end of which the employment will terminate, both of which can be beneficial to the employee in terms of getting paid while not having to continue to attend work to the end of their contractual or statutory notice period.
Conclusion
I hope this guidance provides some comfort in how to deal appropriately with employees to ensure that they leave an organisation with ‘dignity and respect’ and to minimise disruption to your business and limited reputational risk; whilst ensuring employment law compliance.