“Off the record” settlement discussions with an employee cannot be referred to in subsequent court proceedings.
These changes to UK employment law took effect in July 2013. Employers may now seek to end an employment relationship through the use of a settlement agreement without being exposed to the risk of the settlement discussions being subsequently referred to in court proceedings if agreement is not reached.
The legal position
Both parties can now initiate settlement discussions even when there is no dispute between them. Previously (and this continues to be the case) “without prejudice' discussions (discussions which should not be referred to in litigation) required there to be an existing dispute between the parties. This would therefore not extend to discussions where, for example, the employment relationship is not working but has become a full-blown dispute. Therefore, these new laws effectively extend the ‘without prejudice’ rule to ‘off the record’ settlement discussions, in some circumstances.
The new protection is limited to certain types of unfair dismissal claim and does not extend to many other unfair dismissal claims including whistleblowing. It also does not extend claims relating to discrimination.
In addition, to prevent the discussions being referred to in any subsequent court proceedings (in the event negotiations break down and an unfair dismissal claim is brought), the law requires both parties not to have behaved “improperly”. ‘Improper behaviour’ is set out in a separate code and includes harassment, bullying, use of offensive words, actual or threatened physical assault and unlawful discrimination.
Until we have guidance from the courts, it remains unclear what other factors might be considered to be ‘improper behaviour’ during the settlement discussions. For example, actions such as suspending an employee on full pay, stating that the offer is non-negotiable or refusing to settle one of many claims unless all parties settle together may or may not be considered to be improper behaviour.
Employees may be more likely to allege they have been bullied or argue that the reason for the settlement discussion arose from unlawful discrimination – such allegations could result in a UK court deciding that the discussions could be referred to in court proceedings as they were ‘improper’. When a party argues this position, the court will need to hold additional and separate hearings to consider the point which will inevitably result in increased costs for both parties.
In the occasional straightforward unfair dismissal case where, for example, the employer considers the employee is unhappy and may welcome a separation or where personality conflicts are proving difficult to resolve, the new laws may prove to be sensible and helpful. Employers should however take great care to ensure that the provisions of the code are followed and no unfair pressure is placed on the employee to agree to a settlement agreement.
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