When ending an employment relationship, employers often wish to have open and constructive conversations with employees to explore the possibility of an agreed exit. Done properly, pre-termination negotiations can help avoid lengthy and costly disputes. However, there are legal risks involved if such discussions are not handled carefully. Two important legal protections employers can rely on are the Without Prejudice rule and section 111A of the Employment Rights Act 1996 (ERA 1996).

Advising on a settlement agreement

Understanding the Legal Principles

Without Prejudice Rule: This applies to genuine attempts to settle an existing dispute. If there is already a disagreement between the parties, settlement discussions marked “without prejudice” will generally not be admissible in court or an employment tribunal.

Section 111A ERA 1996: This provides a separate protection for pre-termination negotiations even when no existing dispute exists, so long as the claim is for ordinary unfair dismissal (it does not apply to claims such as discrimination, whistleblowing, or automatic unfair dismissal).

Key Practical Steps for Employers to take to avoid the risks of negotiations being admissible

  1. Use Appropriate Wording: Clearly mark any written communication as “Without Prejudice and subject to section 111A ERA 1996” to make the intention clear.

  2. Plan the Meeting Carefully: Choose a private setting, and ensure the employee is given time to consider the offer. Allow the employee to be accompanied, even if not legally required.

  3. Avoid Improper Behaviour: Any threat, undue pressure, or coercion (e.g., saying “accept or be dismissed”) may render the protections under section 111A ineffective and make the discussions admissible in a tribunal.

  4. Provide Written Terms: Offer a written settlement agreement outlining the key terms. Make it clear the employee has the right to independent legal advice which is also required for the settlement agreement to be legally enforceable on the parties.

  5. Document the Process: Keep notes of dates, who was present, and key points discussed. This helps show the process was fair and reasonable.

Conclusion

When conducted with care, pre-termination negotiations are a useful tool to resolve potential disputes amicably. By understanding and properly applying the Without Prejudice rule and section 111A ERA 1996, employers can protect sensitive discussions and discreetly settle legal claims with their employees.