Question of the Month: What should employers do if an employee raises a grievance about being offered a settlement agreement?

And what impact does this have on the nature of protected conversations?

If an employee raises a complaint about the employer offering them a settlement agreement this will no doubt be a moment to pause and consider the potential impact. Employers will rightly be concerned that such a complaint will, either by design or accident, risk the 'off the record' (i.e. not disclosable before a court or tribunal) nature of settlement negotiations by bringing them into an 'on the record' process such as a grievance.

Without prejudice or s.111A?

There are two ways in which settlement discussions may be 'off the record'.

• the 'without prejudice' rule which covers statements made by parties in a genuine attempt to settle a pre-existing dispute. The rule will apply to settlement discussions in practically all situations where there is an existing dispute and can only be lifted in situations where at least one party is found to have abused a privileged occasion.  
• s.111A of the Employment Rights Act 1996 is a statutory creation which allows employers to enter into pre-termination negotiations with employees to bring employment to an end by mutual agreement. There doesn't need to be a pre-existing dispute for s.111A to apply, but it will only protect 'off the record' discussions in straightforward unfair dismissal claims. It will not apply if the employee complains of discrimination or automatic unfair dismissal, for example. Also, if a tribunal decides that the employer acted improperly then s.111A can be disapplied. What is 'improper' includes, but is much wider than, the abuse of privilege as per the without prejudice rule and will also cover bullying, harassing or intimidating behaviour by the employer. This can create a lower bar for lifting s.111A protection than for the without prejudice rule.

How can a grievance affect the application of without prejudice and s.111A?

This will depend on the nature of the complaint. For the purposes of this article, we will assume the grievance alleges that the employee has been offered a settlement agreement because the employer does not want to deal with allegations of discrimination and makes other complaints about the way performance issues have been raised by the employer.

A complaint like this does not lift the without prejudice rule in respect of settlement negotiations and the employer could seek to argue that an offer to settle, and a subsequent complaint about that offer, is part of the off the record discussions. However, ignoring a complaint does create other risks. The employer should also be mindful that s.111A will not cover the settlement agreement negotiations in the event of a claim of discrimination.

Can an employer ignore the complaint?

An employer will be taking a risk if they ignored a complaint, even if it is simply about being offered a settlement agreement. An employer certainly could not ignore a complaint about discrimination or the handling of the employee's performance issues, regardless of whether the without prejudice rule or s.111A applies.

Grievances must be dealt with by an employer, as a tribunal would expect reasonable employers to investigate a complaint from an employee.  A failure to deal with an employee complaint could be a breach of the implied term of mutual trust and confidence.  That failure could also be an act of discrimination. Either would give the employee the opportunity to resign and claim constructive dismissal.

A complaint or grievance about the offer of a settlement should not mean that the employer halts any settlement discussions.  However, if the grievance is about the way in which those discussions are being held, e.g. in an oppressive, intimidatory or discriminative manner, then the employer must take steps to ensure the discussions are being conducted properly.    

Can an employer keep off the record matters separate?

If an employer is facing a complaint about the offering of a settlement agreement, regardless of whether the without prejudice rule or s.111A applies or not, it is good practice to assume that the employee will bring a tribunal claim and that the question of admissibility will be fought at a hearing.

An employer could consider the complaint about being offered a settlement agreement separately from the other points in the grievance. This way, if the without prejudice rule or s.111A is upheld, the correspondence dealing with negotiations is easy to separate from open correspondence dealing with the other grievance points. If the without prejudice rule or s.111A is lifted, the employer can still show the complaint was dealt with.

Comment

Employers need to bear in mind that employment tribunal judges will know that efforts have likely been taken to settle a matter off the record either prior to or after the termination of employment, and in many circumstances a judge will expect it.

That said, employers should be attentive to the details when seeking to rely on the without prejudice rule or s.111A. For instance, it is useful for employers to start an on the record process to document an existing dispute before entering into termination negotiations as this will increase the likelihood that both the without prejudice rule and s.111A will apply to keep settlement discussions off the record.

By engaging with the grievance about the offer, employers avoid giving employees an excuse to claim constructive dismissal.  Dealing with the complaint separately (at least in terms of documentation) from other grievance points could help sift out any privileged element.

However, employers must recognise that s111A and the without prejudice rule will not give a blanket protection for everything said or done in the course of negotiations and care must be taken to ensure such negotiations are conducted properly.