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Settlement Discussions

When can settlement discussions take place?

Settlement discussions can take place at any stage of the employment relationship and relate to proposals for an employee to waive either certain specified claims, or (more usually) the terms on which an employee’s employment will terminate. Discussions can take place instead of, or alongside, a formal disciplinary or grievance procedure if there has been a serious breakdown in the employment relationship. The discussions allow the parties to explore a clan break.

How can settlement discussions take place?

S. 111A of the ERA 1996 provides that offers to end the employment relationship on agreed terms can be made on a confidential basis, which means that they cannot be used as evidence by an employee in any later claims. These pre-termination negotiations are treated as confidential whether or not there is a current employment dispute, and whether or not one of the parties is aware that there is an employment problem. This allows employers the scope to make offers without the risk of legal repercussions if, for example, the employer is unhappy with the employee’s performance or conduct but has not yet raised this with the employee.

How long can settlement discussions take place?

There is no fixed timescale for discussions to tale place, although a party may place a time limit on any offer made. In the ACAS Code of Practice on Settlement Agreements, they recommend a minimum of 10 working days to consider a settlement offer and to take advice on the terms of a formal offer and settlement agreement, unless the parties agree otherwise.

What does ‘without prejudice’ mean?

This is a non-statutory principle which operates in a similar way and applies to verbal and written communications. In order to be effective a genuine offer of settlement must be made and it can only apply if there is an existing dispute, so that S.111 offers more flexibility. It cannot apply if there is unambiguous impropriety, for example undue influence, perjury, fraud or blackmail.

What are the limitations on settlement discussions?

There are some important exceptions to S. 111A of the ERA 1996.

Claims that relate to an automatically unfair reason for dismissal such as whistleblowing, union membership or asserting a statutory right are not covered.
Claims made on grounds other than unfair dismissal, such as claims of discrimination, harassment, victimisation or other behaviour prohibited by the Equalities Act 2010, or claims relating to breach of contract or wrongful dismissal (see Contractual Claims) are not covered.
If there is improper conduct, an Employment Tribunal will decide if it is just to exclude or admit evidence of negotiations. This includes (but is not limited to) unambiguous impropriety, harassment, bullying, intimidation, all forms of victimisation and discrimination, as well as using the threat of dismissal before disciplinary proceedings have begun. Other examples include failing to allow sufficient time to consider an offer or improperly threatening to damage an organisations reputation.
It will not necessarily follow however that if evidence of negotiations is admitted that an employer will lose unfair dismissal proceedings, or that an employee will lose if evidence is excluded.

Is there a right to be accompanied during settlement discussions?

There is no right to be represented, but ACAS recommend this as good practice, which may avoid allegations of improper conduct.

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