Make me a (non-discriminatory) offer I can't refuse!

14 Nov

According to the latest government statistics, the median award by Employment Tribunals over the last year for unfair dismissal was £4,832 but the largest percentage of claimants received awards of only £1,000-1,999.

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Make me an offer!


According to the latest government statistics, the median award by Employment Tribunals over the last year for unfair dismissal was £4,832 but the largest percentage of claimants received awards of only £1,000-1,999. Disability had the highest median award for discrimination claims of £7,536. Most discrimination awards are lower than this.

The modest level of these awards might come as a surprise to many employers and employees who often spend much larger sums defending or pursuing these claims through Employment Tribunal litigation.

Very often, even if the claim succeeds, the amount awarded is less than the employee was claiming, and at the same time less than the employer, at a much earlier stage, would have been willing to pay to settle the dispute without litigation.

There are many reasons why a negotiated settlement is often better for both sides but these low median award figures, coupled to the new requirement to pay fees to start an employment tribunal case, is likely to give employees in particular an added incentive to try to settle rather than litigate.

Often both the employer and the employee would like to try to settle an employment dispute through a negotiated exit, but, they fear that, if they mention it, the fact that they have done so will damage their position in the Employment Tribunal if the negotiations fail.

Before the 29th July 2013 the only protection available to either side to prevent disclosure of pre-termination discussions, was to try to invoke the “without prejudice” rule. This is a common-law rule which applies to all areas of law and it protects genuine attempts to settle genuine disputes. The main problem with the rule from an employment law point of view is that in order for it to apply, there has to be a genuine dispute between an employer and employee. The fact that an employee has raised a grievance, for example, does not necessarily mean that there is a genuine dispute.

From the end of July 2013, the possibility of using the “without prejudice” label in all disputes continues, but alongside this, a new rule in section 111A Employment Rights Act 1996 has been introduced to try to make in-house settlements easier to discuss, at least in some cases.

The new rule says that negotiations before termination of employment will not be admissible (i.e. will not be able to be referred to at the Tribunal) in ordinary unfair dismissal claims. Negotiations include the making of an offer or the discussion of terms on which the employment will come to an end.

The big difference between the new rule and the “without prejudice” rule is that the new rule applies even if there is no “genuine dispute” to settle.

This new rule has some limitations and exceptions and the main one is that it applies only to “ordinary dismissals” such as for redundancy, misconduct or incapacity and does not apply in any claim for “automatically unfair dismissal” for whistleblowing, or for asserting health and safety concerns or statutory rights, or as a result of discrimination.

Neither the “without prejudice” rule nor the section 111 ERA 1996 rule can be used to try to cloak anything said or done which in the Tribunal’s opinion was improper. The protection will not apply where there is perjury, blackmail, undue pressure, racist or sexist comments, and harassment and so on.

Practically speaking, both employers and employees who wish to keep pre-termination discussions confidential will continue to use the without prejudice rule, and discuss matters in a fair and balanced manner.

The main impact of the new section 111A will be to give some additional comfort and protection to an employer or employee who has not yet got into an open dispute but who is contemplating ending the employment relationship, and who wishes to explore with the other party whether there is common ground on which to reach an agreement about this.

Where there are existing formal grievances or disciplinary matters ongoing, a settlement discussion is not a good reason for lengthy delays in these by either side – and in an appropriate case the two processes should continue in parallel.

Remember, that if a settlement agreement is reached, it will not prevent claims in the Tribunal being brought unless the formal requirements of section 203(3) Employment Rights Act 1996 are met. These requirements are likely to be amended in the near future but at the time of writing they are that (i) the agreement must be in writing, (ii) the agreement must refer to the particular proceedings or contemplated proceedings, (iii) the employee or worker must have received advice from a relevant independent legal adviser as to the terms and effect of the proposed agreement and, in particular, its effect on his ability to pursue his rights before an employment tribunal, (iv) the adviser must have insurance to cover the advice,  (e) the agreement must identify the adviser, and (f) the agreement must state that the conditions regulating settlement agreements under the Employment Rights Act (or other relevant legislation) are satisfied.

If you think you might need help with settlement discussions or you would like an agreement drafted then contact us

Jeremy Burns
November 2013

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