How to have a “protected” conversation with an employee: the limitations and pitfalls

During our popular Q&A sessions for In-House Lawyers, we looked at settling employee disputes. This article follows on from that Q&A session, and explores how to have a protected conversation with an employee – and the limitations of doing so.

Sometimes an employer wants to part company with an employee. This may be because there are concerns about their conduct or performance, or simply because the employer needs to reduce headcount.

Sometimes, the reasons can be more intangible, for example, the employer may feel that the employee is no longer the right fit for the job, or the employee may be a very difficult individual who does not get along with colleagues and is damaging to team morale and productivity.

If an employer wants to dismiss an employee, then employment law dictates that the employer must have a reason for dismissal and must follow a fair process before deciding to dismiss.

In some, but not all, of the above scenarios the employer may be able to establish a statutory fair reason for dismissal and could fairly dismiss an employee, provided it follows a fair process. However, in many cases, the employer may want to avoid the stress and pressure of going through this process and maybe looking for an alternative.

So, what are the alternatives? There are two potential options open to the employer:

• To have a “without prejudice” conversation with the employee
• To have a “protected conversation” with the employee falling under section 111A of the Employment Rights Act 1996.

Both mechanisms might allow the employer to have an open conversation with the employee and propose an exit package to them without worrying that conversation could be used against them in any future litigation.

In both cases, the aim would be to reach an agreement whereby the employee signs a settlement agreement to bring employment to an end. However, the two concepts can cause confusion, and there are key differences between them which may trip up the unwary employer. So, what are the key concepts and differences?

The Without Prejudice rule

A conversation can only be without prejudice if there is an existing dispute between the parties and just marking correspondence “without prejudice” will not make it so.

Whether or not there is an existing dispute will depend on the facts, but it generally means a situation where litigation is contemplated. The fact that an employee has raised a grievance or is subject to disciplinary allegations may not be enough.

The crucial question is whether the parties are contemplating litigation, or are likely to, if the negotiations fail.

The rule applies to any type of claim, including potential claims for discrimination or whistleblowing, provided it involves a genuine attempt to settle a dispute. Acts of “unambiguous impropriety” are not covered by the rule, but this is a limited exception that will only apply to the clearest cases of abuse by the employer.

“Protected” conversations

A new statutory framework was introduced in 2013, under Section 111A of the Employment rights Act 1996, to operate alongside the without prejudice principle. It was intended to make it easier for employers to initiate settlement conversations with employees without a risk of these conversations being admissible in employment tribunal proceedings.

This also led to ACAS producing a Code of Practice on settlement agreements, and accompanying guidance, to promote good practice in proposing and negotiating settlements.

A crucial distinction between this and the without prejudice rule is that there is no requirement for there to be in existing dispute and protection extends to the details and existence of the protected conversation. The proposal must be one which involves the termination of employment.

However, there is an important limitation: the protection only extends to ordinary unfair dismissal claims and does not extend to claims for discrimination or whistleblowing. There is also no protection for anything that could be regarded as “improper behaviour”. This is wider than the concept of an unambiguous impropriety and might cover threatening behaviour by the employer.

There appears to be no statutory requirement to label the conversation as being a one covered by Section 111A. The protection applies to “pretermination negotiations” which is defined as “any offer made, or discussions held, before the termination of the employment in question, with a view to it being terminated on terms agreed between the employer and the employee”. However, we strongly recommend that any conversation or correspondence is labelled in this way, particularly if the without prejudice rule does not apply.

How to avoid the pitfalls

• Be well prepared – consider carefully whether the conversation should be under the without prejudice or Section 111A rule (or both) and ensure that you use the right terminology.
• Consider in advance how you will put the proposal to the employee, for example, will you tell them that they are facing disciplinary action or performance procedures if the offer is not accepted?
• Do not try to mislead the employee or make unfounded threats. Suggesting that there are performance concerns when you cannot back that up is likely to upset and antagonise the employee and cause them to seek legal advice sooner rather than later. Be honest about the reason for having the conversation where possible, particularly if the employee has done nothing wrong.
• Although it is not a pre-requisite to put anything in writing, it is good practice to follow up in writing on what has been discussed, making it clear that you are relying on Section 111A, if applicable, and setting out what that means.
• Ensure that you label any correspondence correctly. Section 111A and the without prejudice rule may both apply in some circumstances and, if in doubt, you can use both labels.
• Ensure that senior managers are fully briefed and supported when having such conversation. Managers may often feel that they should deal with such conversations themselves, particularly when dealing with longstanding colleagues. Whilst that is commendable, they should be fully briefed before having the conversation – we often encounter scenarios whereby an attempt has been made to have a “without prejudice” conversation when the rule does not apply. Lawyers acting for the employee will use this to their advantage.
• Remember that no matter how careful you are, your correspondence could end up being admissible as evidence e.g. where a Section 111A offer has been made but the employee alleges this was only done because of a protected characteristic. Correspondence should therefore come across as reasonable and balanced rather than threatening, so that it does not cause you embarrassment in that scenario.