When the new concept was introduced by the Enterprise and Regulatory Reform Act 2013 it was heralded as a much-needed removal of the red tape involved in terminating an employment relationship that is not working out. It is designed to allow employers and employees to have ‘grown-up’ confidential conversations on settlement with a view to termination, even where there was no previous dispute.
Those discussions will be inadmissible as evidence in any subsequent employment tribunal proceedings for unfair dismissal (except automatically unfair dismissal), giving comfort to employers that if the negotiations fail they should not come back to bite them if they later have to dismiss through more traditional means.
However, the protected status of the conversations only applies in limited situations. And to benefit from that status there is a fair amount of red tape involved in the process of holding a protected conversation.
The Acas Code of Practice on Settlement Agreements sets out the requirements for holding a protected conversation. It will not have protected status where there has been ‘improper behaviour’ (the Code provides some guidance on improper behaviour but ultimately it would be for a tribunal to decide) and therefore there is risk of conversations being deemed admissible in evidence.
As the protected status is limited to unfair dismissal claims, difficulties arise when the employee brings other claims such as discrimination. The settlement discussions may be inadmissible in relation to the unfair dismissal elements, but admissible in relation to other claims.
We have recently seen the first EAT judgment on confidentiality of unsuccessful settlement discussions in Faithorn Farrell Timms v Bailey. This judgement highlights the differences between the admissibility rules under the without prejudice regime and protected conversations. Without prejudice only applies where there is an existing dispute.
The EAT case has highlighted two further differences:
- The parties cannot waive the confidentiality of protected conversations (waiver is possible in relation to without prejudice discussions).
- The inadmissibility rule does not just apply to the content of the protected discussions, but also to their very existence. This protection is broader than with ‘without prejudice.’
In appropriate cases employers would be well-advised to seek the safeguards offered by both protected conversations and ‘without prejudice.’ This will allow pre-termination negotiations to be approached with much greater confidence.
Nina Robinson is director at ESP Law, which provides HR magazine’s HR Legal Service