Imagine the following situation.....you have a long standing employee with a below average performance record (although shockingly no formal procedure has been started) and they have no disciplinary record but are as irritating as a leg full of mosquito bites. Wouldn't it be great if you could tell them outright that it is not working out and that you want to discuss the terms upon which they would agree to leave? This is the intention behind the Enterprise and Regulatory Reform Bill (the "Bill").
At present, there is a risk associated with discussing departure terms with an employee as you will not be covered by the "without prejudice" rule unless there is an existing dispute. Such a discussion could fuel bullying allegations or be used as evidence in an unfair dismissal claim.
Under the Government's proposals, the intention is that you would be able to have a fair conversation with any employee about terminating their employment without the employee being able to use that conversation in an unfair dismissal claim. Sounds simple enough doesn't it? Whether wording can actually be drafted to safely put it into practice is altogether a different issue.
The draft wording in the Bill states that in an unfair dismissal claim "an employment tribunal may not take account of 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."
This provision does not give employers as much scope as previously thought when protected conversations were initially discussed. The intention appears to be that settlement terms are put forward during the conversation. A BIS press release stated that the offer could be in the form of a settlement agreement or a letter, although the Bill wording does not specify that settlement terms need to be put forward during the conversation or that they need to be in writing. This provision will not apply in cases of automatic unfair dismissal (e.g. whistleblowing) and such conversations can be used as evidence in a discrimination claim.
BIS have said that settlement agreements should not replace performance management and that fair processes would still need to be followed. However, there is no pre-requisite that there be any motivation for having such a conversation (although if there is no context to such discussions an employee may be led to conclude that there was a discriminatory reason).
In addition, and this is no doubt where things could potentially get very messy indeed, if an Employment Tribunal considers that anything said or done was "improper" or "connected with improper behaviour" it will be admissible. There is no guidance yet on what "improper" means but it may well be put on you to adduce evidence of issues with the employment relationship and perhaps evidence that the settlement terms put forward were reasonable?
There is definitely potential for the waters becoming muddied in the employment tribunal. With Judges potentially having to decide whether a conversation is improper and if not then putting knowledge of it aside for purposes of an unfair dismissal claim but not any related discrimination claim. It is also difficult to see how the conversation could be completely disregarded if it forms one element of a constructive dismissal claim, or if a grievance is raised subsequently as a consequence of the conversation. This may put extra pressure on the Tribunal system if there is a need for more pre-hearing reviews, or it adds to the length of the Hearing.
Also, for many, this concept will go against the protectionist intentions of the Employment Rights Act. Essentially, if the employee does not agree to go on the proposed terms they will have to stay on in employment, knowing management want them out, without recourse. Employers may well be tempted to put forward an offer that they know will not be accepted to sow the seeds of doubt in the employee and push them to move on.
The Bill is not yet finalised and we will let you know when there are any further developments. In the meantime, as before, we suggest you seek legal advice if you are considering having any pre-termination settlement discussions with employees.