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How to use pre-termination negotiations : a step by step guide

24th February, 2014

In August 2013, we brought you news of the various changes to employment legislation which came into force on 29 July 2013.

Of particular note were the changes made to settlement agreements (previously known as compromise agreements). Settlement agreements are legally binding contracts that can be used to end an employment relationship on mutually agreed terms and settle actual or potential employment tribunal claims.

The new legislation also introduced the concept of “pre-termination negotiations” which means that any discussions in respect of settlement agreements cannot be used as evidence in an ordinary unfair dismissal claim.

Pre-termination negotiations can be a very useful tool for employers, but they require careful consideration and expert legal advice. We set out below a summary of how and why employers may wish to engage in pre-termination negotiations.

1. How is the protection afforded to employers by pre-termination negotiations different from “without prejudice” protection?

The “without prejudice” rule means that, subject to certain exceptions, discussions which take place in an effort to resolve or settle an existing dispute cannot be used in a court or tribunal as evidence. The fact that an existing dispute was required meant that the issue needed to have reached the point of a grievance, disciplinary or performance management process or even a tribunal claim before this protection would apply.

The introduction of pre-termination negotiations means than an employer can now approach employees about the possibility of ending the employment relationship even where there is no prior dispute. This therefore increases the number of situations in which employers can introduce a severance discussion.

2. When might an employer consider using pre-termination negotiations?

Unfortunately, there are occasions where it becomes apparent that the employment relationship is not working out as planned. The employer may have concerns about the employee’s performance or conduct or may even need to consider making redundancies.

Pre-termination negotiations allow employers to have a “grown-up” conversation with employees, about potential options (usually ending the employment relationship together with a severance package) before initiating a lengthy disciplinary, performance management or consultation process. The possibility of a mutually agreed termination may be particularly attractive to an employee who is facing disciplinary allegations or performance concerns.

3. So what are the Next steps to initiate a pre-termination negotiation?

To initiate a pre-termination negotiation, it is advisable to meet with the employee to outline the concerns which have triggered the discussion (note that more than one meeting may be required). It should be made clear to the employee that entering into a settlement agreement is just one option, no final decisions have been made and if the employee chooses not to do so, the employer will seek to resolve the issue by following the appropriate formal process.

4. Provide a written agreement

Even if the subject of a negotiated severance is initially communicated verbally, it must be incorporated into a written settlement agreement which meets a number of legal requirements in order for it to become binding. This will need to be provided to the employee for their consideration and to enable them to take legal advice on the same. The settlement agreement should generally be provided with a detailed covering letter.

Employees must be usually be given a minimum of 10 days to consider the terms of the settlement agreement. However, this period can be shortened if agreed between the parties. If the employee decides not to accept the terms offered, the employer will still need to take appropriate steps to resolve any outstanding issues by following the appropriate formal process.

5. Beware!

This protection only applies to ordinary unfair dismissal claims. The confidentiality protection falls away where there is deemed to be “improper behaviour”, such as undue pressure or intimidation, or in relation to claims which are not a straightforward ordinary unfair dismissal such as automatic unfair dismissal or discrimination. Aaron & Partners therefore urges any employer considering pre-termination negotiations to seek legal advice.

For further information and advice in relation to pre-termination negotiations, how to initiate difficult conversations with employees or assistance with drafting, negotiating or finalising settlement agreements, please contact Helen Watson on 01244 405565 or send an email to [email protected].

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