Improper behaviour during pre-termination negotiations (protected conversations)

This issue was considered in the Employment Appeal Tribunal’s (EAT) recent decision in the case of Kevin Gallagher v McKinnon’s Auto and Tyres Limited.

Facts & background

Mr Gallagher was employed by McKinnon’s Auto and Tyres Limited (the Respondent) as a Bank Manager. Following a period of absence in 2022, Mr Gallagher was invited to a return to work meeting. During that meeting, the Respondent offered Mr Gallagher a settlement package to terminate his employment. He was given 48 hours to consider the offer and was told if he did not accept the offer then the Respondent would go through a redundancy procedure. Mr Gallagher brought an employment tribunal claim for unfair dismissal, after rejecting the offer and subsequently being made redundant by the Respondent.

In his tribunal claim, Mr Gallagher sought to rely on the pre-termination discussions he had with the Respondent, in particular referring to the Respondent’s actions during the meeting as well as in follow up text messages.

The Respondent contended that the discussions between the parties were inadmissible by virtue of them being protected pre-termination negotiations under section 111A of the Employment Rights Act 1996 (ERA). The employment tribunal agreed, ruling that the discussions were, indeed, inadmissible.

Mr Gallagher appealed the Tribunal’s decision about the admissibility of the s111A discussions, but was unsuccessful and we explore the reasons for this below. However, it should be noted that Mr Gallagher’s substantive complaint of unfair dismissal is yet to be determined; the EAT directed that the tribunal should now consider the Claimant’s unfair dismissal complaint, but without regard to the evidence about the pre-termination negotiations.

The legal bit

Pre-termination negotiations (also known as protected conversations) are “any offer made or discussions held, before the termination of the employment in question, with a view to it being terminated on terms agreed between the employer and the employee” (section 111A(2) of the ERA). Under section 111A of the ERA, evidence of pre-termination negotiations are inadmissible in unfair dismissal proceedings and they can also be treated as confidential even where there is no current employment dispute (which differs from the without prejudice principle). There are, however, some exceptions to the admissibility provisions and the relevant exception in this case revolved around whether there had been “improper behaviour.”

Improper behaviour is not defined under the ERA. However, helpfully, the ACAS Code of Practice on Settlement Agreements (the ACAS Code) together with non-statutory guidance provides some examples of what could be considered improper ranging from physical assault and aggressive behaviour to victimisation

Ultimately, it is a matter for the tribunal to decide if, in all the circumstances, improper behaviour has occurred and whether it would be just to admit the content of those discussions as evidence.

Relevant examples from the ACAS Code re improper behaviour in pre-termination negotiations

In arguing (unsuccessfully) that the Respondent had engaged in improper behaviour in the pre- termination negotiations, Mr Gallagher relied on 18(e) of the ACAS Code which refers to placing undue pressure on a party. Specifically, he pointed to the examples at:

18 (e)(i) not giving reasonable time for consideration;
18 (e)(ii) saying before any form of disciplinary process has begun that if the settlement proposal is rejected that the employee will be dismissed.

Employment Appeal Tribunal (EAT)

In his appeal to the EAT, Mr Gallagher argued that the tribunal’s decision to disallow evidence of the pre-termination negotiations was perverse and it had erred in failing to find that the following acts of the Respondent placed undue pressure on him amounting to improper behaviour:

1. He was told he would be made redundant if the offer was not accepted (which he argued was a paradigm example under paragraph 18(e)(ii) of the ACAS Code – see above)
2. The meeting to put forward the offer was set up under false pretences and he was led to believe it was a return to work meeting and he was taken by surprise.
3. He was only given 48 hours to respond to the settlement proposal. He argued this was inadequate and fell short of the period of 10 days suggested under paragraph 12 of the ACAS Code.

The EAT rejected each of the Appellant’s contentions and dismissed the appeal. Adopting the same numbering as above concluded the following:

1. It was highlighted the ACAS Code is not binding and that paragraph 18(e)(ii) analyses undue pressure in the context of a threatened disciplinary dismissal, rather than a redundancy process and the two are distinct. Confirmation that a role is redundant does not inevitably mean that the person who performed the role will be dismissed, because, for example, there will be consideration of suitable alternative roles.
2. It was not accepted that the Respondent had lied about the purpose of the meeting. Whilst it may not have been fair for the Respondent’s directors to use a discussion about Mr Gallagher’s return to work as a pretext for raising with him the possibility of a settlement package, it did not constitute impropriety to do so.
3. Whilst another judge may have reached a different conclusion, it had been open to the judge to decide, having regard to all the circumstances, that the 48-hour deadline for responding to the verbal offer, did not amount to undue pressure. It was also noted that the 10 days referred to in the ACAS Code are for an employee to consider and take advice upon the “formal written terms of a settlement agreement” which can be distinguished from the initial offer in principle and settlement sum, which were relevant here.

Comment

As referenced above, evidence of pre-termination negotiations is generally inadmissible in unfair dismissal proceedings but this case serves as a useful reminder that the way in which such discussions or negotiations are conducted can have an impact on their confidentiality / admissibility. Care should be taken by employers when conducting pre-termination discussions (protected conversations) and it should be made clear to employees when having such discussions that if the parties are unable to reach an agreement or the offer is rejected this will have no bearing upon any subsequent internal process or subsequent decision.

Although in the particular circumstances of this case, providing 48 hours for the employee to consider the verbal offer was not found to amount undue pressure, as the EAT pointed out, another judge may well have reached a different conclusion on that point. Accordingly, we still recommend following the guidance set out in the ACAS Code, in order to avoid allegations of impropriety.

Read the ACAS Code of Practice on Settlement Agreements, which should be considered before engaging in pre-termination negotiations.