Settlement Agreements and “Protected Conversations”

The Government has introduced the concept of ‘protected conversations’ which is a development of the old ‘without prejudice’ rule.

The difficulty with the ‘without prejudice’ rule was that it only, strictly speaking, applied in the context of existing litigation. The difficulty with that was that in circumstances where an employee has no idea whatsoever that the employer is dissatisfied with them then there can hardly have been said to be any ongoing dispute.

Rightly or wrongly one of the cornerstones of the Government’s approach to employment law reform is that they argue more jobs would be created if employers thought it was easier to dispense with the services of an employee if it did not work out. The Government believe that there is a perception that it is too difficult to address the process of what is described in their recent review as ‘letting people go’. Changes to rules on apprenticeships and the extension of the qualifying period for unfair dismissal for two years are two other moves in the same direction.

Many employers will be aware that situations arise where an employment relationship is not working out but where it is difficult and time consuming to be able to arrive at a position where the employer can rely upon one of the five potentially fair reasons in law to dismiss. It is considered particularly difficult where the issues are performance related or indeed personality based.

In many employment situations the employee is blissfully unaware of the problems that the employer perceives and as such it is pushing it somewhat to say there is an ongoing dispute. That is not to say that such an approach does not work in many cases where they are described as ‘off the record’ at the outset or later ‘without prejudice’ when a Compromise Agreement is produced. However there is still that slight risk.

We now have a new framework for allowing what the Government describe as “open dialogue, fairness and mutual agreements between parties”. This will allow employers and employees to have protected conversations and enter into Settlement Agreements which will be simplified versions of Compromise Agreements. ACAS, who already of course deal with COT3 settlements, have published a Code of Practice on Settlement Agreements.

The new regime
In summary, pre-termination negotiations which take place after 29th July 2013 cannot be referred to in unfair dismissal proceedings before the employment tribunals. To reiterate, there is no need for an existing dispute before a “protected conversation” takes place.

The new regime does have certain caveats, namely that:

  • The protection applies only in respect of "ordinary" unfair dismissal claims i.e. not where an employee brings a claim for automatically unfair dismissal (for example, whistleblowing), or any other claim such as discrimination. It remains to be seen how the tribunals will deal with multiple claims but employers will need to be wary of being too frank about what they say, especially where there is a suspicion that the employee is likely to allege or bring such other claims.
  • If either party engages in "improper behaviour", evidence of pre-termination negotiations may be put before the tribunal. What constitutes improper behaviour is ultimately for a tribunal to decide on the facts and circumstances of each case. The ACAS Code provides a non-exhaustive list of examples of improper behaviour as outlined below.


Acas Code: examples of improper behaviour

  • All forms of blackmail, harassment, bullying and intimidation, including through the use of offensive words or aggressive behaviour.
  • Physical assault or the threat of physical assault and other criminal behaviour.
  • All forms of victimisation (this being in the legal sense e.g. as a result of someone having claimed or alleged discrimination or has supported someone else to do so).
  • Discrimination because of age, sex, race, disability, sexual orientation, religion or belief, transgender, pregnancy and maternity and marriage or civil partnership.
  • Putting undue pressure on a party. For instance: not giving them reasonable time for consideration of a settlement offer (it is implied in the Code that 10 working days is reasonable if the employer is presenting a written agreement and the employee is to take advice, it is silent as to what is reasonable where the discussions are verbal in the first instance); an employer saying before any form of disciplinary process has begun that if the offer is rejected then the employee will be dismissed; an employee threatening to undermine an organisation’s public reputation if the organisation does not sign the agreement, unless the provisions of the Public Interest Disclosure Act 1998 apply.


Acas Code: behaviour unlikely to be improper
The Code also provides some examples of what would not usually be considered improper behaviour:

  • Setting out in a neutral manner the reasons that have led to the proposed settlement agreement.
  • Factually stating the alternatives if agreement cannot be reached, including the possibility of disciplinary action if relevant.

What this means for you
When these three changes are considered together, a broadly favourable picture emerges for employers, particularly those seeking a fair but quick settlement with a difficult or underperforming employee. The new regime certainly gives employers more scope for negotiation than was the case a few months ago.

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