Protected conversations and settlement agreements: Gallagher -v- McKinnon’s Auto and Tyres Ltd
HR Managers and employment lawyers spend much of their working lives managing exits. It was ever thus. Prior to 2014 and the advent by the coalition government of protected conversations under S111A of the Employment Rights Act 1996, discussions and ‘negotiations’ about a possible end to the employment relationship could only be conducted formally through disciplinary or redundancy consultation processes or where there was an extant dispute on a ‘without prejudice’ prejudice.
S111 A now generally allows confidential communications regarding pre-termination negotiations to be inadmissible for the purposes of an unfair dismissal claim but there is an exception that if anything said or done is improper, or connected with improper behaviour, it will be admissible if the tribunal considers it just. There is relatively little law on what constitutes improper behaviour but the ACAS Code of Practice on Settlement Agreements (which is not itself strictly legally binding) recommends that: an employee be given a minimum of 10 days in which to take advice on a written settlement agreement; that an employee be allowed to be accompanied ‘to the meeting’ by a companion (fellow worker or trade union official); that employee be given an opportunity to clarify any offers and ask questions; and that the employer should act reasonably and politely in putting the offer to the employee and not pressurise them.
Obviously if as a matter of fact no choice is given to the employee and the employee is told that their employment will be terminated if they do not accept the offer of settlement that would be improper, as would an offer made at a meeting convened for another purpose such as to consider a request to work on more flexible terms. Similarly if undue pressure is put on an employee. Each case will turn on its own facts. In Gallagher -v- McKinnon’s Auto and Tyres Ltd a branch manager who was absent from work for a relatively short period was invited to a meeting which he thought was for the purpose of discussing his absence and his employer thought was to initiate a process to consider whether he was redundant as his role was no longer required. At the meeting he was offered an enhanced redundancy package of £10,000 in return for signing a settlement agreement, that he had 48 hours to accept the package, if he did not do so the offer would be withdrawn and the employer would initiate the redundancy process.
Mr Gallagher was upset, regarded the employer’s conduct as improper, and did not accept the offer. Following a redundancy process he was dismissed for redundancy. He brought a tribunal claim alleging unfair dismissal claiming that improper pressure had been put on him.
The tribunal had to decide whether the conversation about the settlement agreement offer was improper behaviour. It found as a matter of fact: that the employer’s representatives had not been aggressive; they had not told Mr Gallagher that he would have been dismissed if he did not accept the settlement offer; and noted that they did not give him a copy of the settlement agreement to take advice on within 48 hours. The tribunal found that the employer simply made a verbal offer. It is this last point which is significant. If the tribunal had found that the employer had made a written offer of settlement then the 10 day rule might have applied and the 48 hour acceptance period might have constituted improper behaviour.
Practical tip
If an employer wants to quickly agree the terms of a settlement agreement within a short time frame – a scenario we are all familiar with – then put the offer to the employee verbally. Or, if for presentational or other reasons, a letter is preferred, make it clear that the proposal is merely in principle and that, if the employee wishes to continue the protected conversation discussions, they will have at least 10 days to consider the actual settlement agreement with their solicitor or other statutory adviser.
