Under pressure to accept a settlement offer?

pressure settlement

Undue pressure to accept settlement offer?

In an attempt to get the deal done, some employers may be tempted to put as much pressure as they can on the employee by setting a tight deadline for acceptance, or perhaps characterising the evidence they have, stronger or more conclusive, than it really is.

Such an approach could land the employer in hot water. The risk to the employer is that the employee resigns in response and brings employment claims, for example constructive unfair dismissal.  But can the employee rely on what was said and done by his employer during a pre-termination discussion about a settlement agreement?

Discussions before termination about a settlement can amount to a pre-termination discussion, commonly known as a protected conversation, as defined by section 111A of the Employment Rights Act 1996.

What is a protected conversation?

Where an employer offers an employee a settlement agreement, the fact the employer made the offer and the detail of the offer, are not admissible in an ordinary unfair dismissal claim.  But if an employer acts improperly, the offer become admissible.

Spinning (or misrepresenting) the facts?

A recent case in the Employment Appeal Tribunal provides a warning to employers. The employee was suspected by his employer of financial negligence. His employer sought assistance from an accountant who recommended a full disciplinary investigation. Instead the employer decided to offer the employee a settlement agreement to leave. During the settlement agreement discussions and in an offer letter, the employer told the employee the accountant had concluded the employee was guilty of gross misconduct. This was not misleading and untrue.

Unreasonable time-scales to accept the offer

The employer gave the employee six days to accept the offer, with no offer to consider an extension.

Constructive Dismissal Risks

The employee declined the offer, resigned and brought a claim for constructive unfair dismissal, relying on alleged unreasonable conduct of his employer in the way it made the settlement agreement offer.

Admissibility

On appeal, the Employment Appeal Tribunal decided the settlement agreement discussions and offer letter were admissible because the employer had acted improperly, by misrepresenting the accountants recommendations and only giving the employee six days, without good explanation or option to extend.

Conclusions

Pre-termination negotiations (Protected Conversations) can be a useful device for employers and employees to settle disputes and amicably agree severance terms. But they do not replace established employment law good practice nor do they give the employer carte blanche to act improperly without consequences. If an employer pressurises an employee ( for example with unreasonable deadlines) or misrepresents the strength of the case against the employee (for example saying an accountant has determined he is guilty of gross negligence) to try and force the deal, the employee could rely on what was said and done during the settlement discussions in support of an ordinary constructive unfair dismissal claim.

In this case, rather than go through the disciplinary investigation the employer attempted to cut the process short but did so in a way that was improper, enabling the employee to rely on the discussions at the employment tribunal.

Lessons for employers

  • Is the timescale for accepting the offer reasonable and/or justified and/or agreement with the employee, taking into account all the circumstances? A longer period may be appropriate depending on the facts, for example the time of year, the employee’s ability to get advice from his union or solicitors, Consider the ACAS guidance on timescales for access.
  • If you elect for a short-time limit, is there reference to an extension if more time needed?
  • Is removal of email access really necessary? If removal is not ‘with good cause’ / justified there is a risk it will be perceived as pre-determination and/or a breach of trust and confidence, giving rise to a constructive dismissal risk?
  • Be careful not to misrepresent, or exaggerate the background evidence or circumstances leading up to the decision to make the settlement agreement offer.  
  • Consider seeking legal advice before making a settlement agreement offer and/or drafting settlement agreement offers, to ensure the above issues are balanced against the risk of a finding of improper conduct and/or constructive dismissal claims.

Full transcript of case: Lenlyn UKLtd v Mr H Kular

Read more articles: Settlement Agreements

IMPORTANT: The contents of this article are for guidance only and do not constitute legal advice (nor are they intended to constitute legal advice). You should seek advice from a solicitor without delay in relation to your particular case and circumstances.