Protected conversations: unnecessary and ill thought out?
Author: Darren Newman
Consultant editor Darren Newman argues that the new clause to be added to the Enterprise and Regulatory Reform Bill on protected conversations in relation to unfair dismissal cases is ill conceived.
How difficult is it to offer a compromise agreement to an underperforming employee? The Government thinks that it is sufficiently difficult to warrant fresh legislation to make it easier. A new clause is being added to the Enterprise and Regulatory Reform Bill currently going through Parliament. It will prevent employment tribunals in most unfair dismissal claims from taking into account any discussions that took place before the employment ended with a view to terminating the employment on terms agreed between the employer and the employee. The idea is that employers will feel more able to cut to the chase and offer employees a dignified way out, rather than embarking on time-consuming and pointless performance management procedures.
As with many bad ideas, this seems reasonable enough at first glance. There are situations in which performance management processes - or redundancy consultation procedures - are simply delaying an inevitable outcome, when a parting of the ways on agreed terms would be better for both parties. But does the law currently prevent or discourage such offers being made? It is certainly true that the "without prejudice" rule cannot be relied on when the offer is being made before any dispute has arisen. But how much of a problem does that cause?
The argument is that employees can currently use the fact that the employer offered a compromise agreement at the start of the process to argue that the subsequent procedures were a sham and that the employer had a closed mind about the outcome. Anecdotally, we certainly hear of many cases in which this argument is run. However, this has not made its way into case law. There is no line of decisions analysing when it may and may not be fair to offer an employee a settlement before beginning the procedures that ultimately lead to his or her dismissal.
When is it unreasonable to make a settlement offer? With regard to unfair dismissal, everything depends on the context and the surrounding circumstances. Even tone of voice can be important. Where an employer simply tells an employee that a settlement is one possible option that might be discussed if the employee is interested, it is unlikely to be acting so unreasonably that a subsequent dismissal is unfair. However, if an employer tells an employee that he or she is simply not up to the job and has no future with the company, the employer may well be held to have conducted the subsequent performance management procedures with a closed mind.
The logic behind the new clause is that tribunals are failing to distinguish properly between reasonable offers of settlement and unreasonable attempts to bypass fair procedures and force employees to leave. But I have yet to see any evidence that this actually happens. The perception that such offers cannot safely be made might be a problem, but it is a mistake to try to solve a problem of perception by legislating as if the perception were correct. In any event, the new clause does not try to draw that distinction more precisely; it prevents the tribunal from even considering the issue. The new law will in some cases prevent a finding of unfair dismissal where the employer has behaved unreasonably in dismissing the employee. Does that really seem right?
The key exception to the new rule is that tribunals may - to the extent that they consider it just - take into account any conduct that is "improper". This is a new word in employment law. What exactly does it mean? What is the difference between being unreasonable and acting improperly? We must assume that normal unreasonable conduct on the part of the employer will not be regarded as improper, or this new clause would be completely meaningless. Tribunals would be entitled to take conversations into account to exactly the same extent as they can now.
It might be useful to look at the one example I can find in case law: Billington v Michael Hunter & Sons Ltd EAT/0578/03. In that case, the employer called the employee into a meeting and invited her to resign on favourable terms if she felt she was not up to the job. The Employment Appeal Tribunal held that the context of that meeting and the way in which the conversation was conducted was likely or calculated to destroy the trust and confidence at the heart of the employment relationship. However, the case was remitted to the tribunal on the issue of whether or not the employer might have had proper cause for doing what it did given the capabilities and performance of the employee.
How would this case be approached under the new regime? Let's suppose that an employer made an offer of settlement in such a way that it amounted to a fundamental breach of contract. The breach might consist of the tone in which the offer was made, or the things that the employer said about the employee in making the offer. Is a fundamental breach of contract "improper"? If it is, this new provision will change very little. If it is not, an employer will be entitled to undermine the employee's position provided that this is done in the context of an offer of settlement. Since there is no rule that the settlement being offered must be substantial, or even meaningful, there is a danger of opening up a new avenue for unreasonably forcing an employee out of a job. I predict that the case law trying to distinguish "improper" from merely "unreasonable" will take years to reach a conclusion. In the meantime, neither employers nor employees will know exactly where they stand.
There is a further complication to throw into the mix. As drafted, the new rule applies only to unfair dismissal claims. It does not cover claims for discrimination, breach of contract or "automatically unfair" dismissal (for whistleblowing, asserting a statutory right or trade union membership, for example). The obvious consequence of this is that an employee who wants to bring into play discussions that would otherwise be excluded will simply include a claim to which the exception does not apply. How is a tribunal to deal with a discrimination claim that is also an unfair dismissal claim? In a constructive dismissal case, could the claimant win the breach of contract claim - because what the employer said breached trust and confidence - but lose the unfair dismissal claim because the tribunal is prevented from taking that breach into account in assessing reasonableness? How does the tribunal even begin to consider the reason for dismissal without considering the breach of contract that caused it?
The new clause allows the tribunal to consider a "determination made in other proceedings" where that determination looked at the settlement discussion. But in the employment tribunal system a claim for unfair dismissal, breach of contract and discrimination will all be dealt with in the same hearing. The different causes of action cannot be divided into separate cases; that would cause chaos.
This new clause will not make things easier for anyone. It will result in years of case law trying to resolve some of the ambiguities in the drafting and will cause huge confusion in the meantime. Perhaps worst of all, however, it sends completely the wrong message about performance management. It positively encourages employers to think about offering a settlement agreement rather than trying to engage in a constructive process. In doing so, it may lull them into a false sense of security that what they say when making such offers will be protected.
I blame the Beecroft report. Adrian Beecroft did not propose this measure, but it is clear that the Government had to introduce some measure in place of "no-fault dismissals". The Government may win positive headlines for its pro-business stance, but that will be because of the spin placed on this new measure, not because of the measure itself. The new clause is ill thought out and incoherent. If the Government persists with it, it should at least consider some fundamental amendments as the Bill goes through Parliament.
