Pre-termination discussions were inadmissible in an unfair dismissal claim because they...
Protected conversations and impropriety
Gallagher v McKinnon’s Auto and Tyres Ltd
Pre-termination discussions were inadmissible in an unfair dismissal claim because they constituted a ‘protected conversation’ and were not tainted with impropriety.
In 2013 the notion of a ‘protected conversation’ was introduced (s. 111A of the Employment Rights Act 1996). More accurately called ‘pre-termination negotiations’, they are intended to make it easier for employers to initiate settlement conversations with employees with less risk of those conversations being admissible in subsequent tribunal proceedings. Unlike the ‘without prejudice’ rule there doesn’t have to be an existing dispute between the parties for s. 111A protection to apply. Importantly, there must be no impropriety during such discussions and this is for a tribunal to assess.
Background
Mr Gallagher had worked as a branch manager since 2017. In 2022 he contracted COVID and was off work for two weeks. He returned to work but then broke his foot. Having successfully covered his work during the sickness absence, his employer decided it could continue without the need for a branch manager. Mr Gallagher was asked to a meeting on 1 August, ostensibly to discuss his return to work. However his employer was to discuss an exit package which involved terminating his employment for redundancy with an enhanced payment of £10,000. It was explained to him that if he accepted the offer, the parties would enter into a binding settlement agreement. But if he rejected the offer, the employer would initiate a redundancy procedure. He was given 48 hours to think about it. There then followed various communications and the employer provided a breakdown of the payment in response to a request from Mr Gallagher. He did not accept the package and on 21 November was dismissed for redundancy. He claimed unfair dismissal - and wanted to rely on the 1 August discussions as evidencing the unfairness of his termination.
At a preliminary hearing to decide this issue, the tribunal held the 1 August discussions were protected conversations under s. 111A and therefore inadmissible. The meeting had been conducted in a calm and measured way where the offer of compensation and reference to redundancy was not unreasonable and it was not necessarily a foregone conclusion that Mr Gallagher would be made redundant. Mr Gallagher appealed.
EAT decision
The appeal was dismissed.
Mr Gallagher attacked the tribunal’s findings on three (essentially) perversity grounds:
- the comments about what would happen if he did not accept the offer amounted to a statement that he would be dismissed and this was improper behaviour
- setting up the meeting under false pretences as a return-to-work discussion was also improper behaviour, and
- giving him only 48 hours to respond to the settlement offer constituted undue pressure
The EAT rejected all these objections and held that the content of the pre-termination negotiations was inadmissible.
Ground 1: the tribunal had noted the ACAS code which states that it can amount to undue pressure for an employer to say, before any form of disciplinary action has begun, that if a settlement proposal is rejected then the employee will be dismissed. While it was the case that Mr Gallagher had been told that his duties could be covered by other staff, this did not mean that he was therefore going to be dismissed. Rather, if he’d rejected the proposal, a redundancy process would then ensue. Confirmation that a role is redundant does not inevitably mean that the person who previously performed the role will be dismissed.
Ground 2: while it may not have been fair for the employer to use a discussion about Mr Gallagher’s return to work as a pretext for raising with him the possibility of severance on agreed terms, it did not constitute impropriety to do so. The tribunal properly had regard to the fact that Mr Gallagher was swiftly provided with a breakdown of the figure offered; that the meeting was conducted calmly; and that he had time to discuss matters with his family.
Ground 3: the tribunal noted that the period of 48 hours only related to whether Mr Gallagher would accept a verbal offer; he could have accepted it, rejected it, or responded with a counter proposal. If Mr Gallagher had accepted the offer, pre-termination negotiations would have continued and he would likely have been presented with written terms of a settlement agreement to consider. The question for the EAT was whether the tribunal’s conclusion that 48 hours did not subject Mr Gallagher to undue pressure could properly be characterised as perverse. While another judge may have reached a different conclusion about the sufficiency of that period, it was open to the judge in this case to conclude, having regard to all the circumstances, that it did not involve subjecting Mr Gallagher to undue pressure.
Comment
This decision should provide employers with some welcome reassurance that they should be allowed to approach employees and engage in a ‘protected discussion’ about a potential settlement where that settlement is presented as an option alongside a genuine (and lawful) alternative. Key to the employer’s defence here was that they set out the settlement as one potential option to Mr Gallagher, alongside the alternative of starting a redundancy process. By implication this would include a fair and reasonable selection and consultation process, during which Mr Gallagher would have been able to put forward his position, and his continued employment was a potential outcome of the process. Had the choice been between the settlement offer, or being dismissed by reason of redundancy, then it is unlikely the tribunal or EAT would have regarded the negotiations as a ‘protected conversation’.
Another useful point for employers is the decision that giving Mr Gallager 48 hours to consider the settlement proposal was reasonable. Both the original tribunal Judge and EAT were careful to draw a distinction between this verbal offer and request and the ACAS guidance that suggests employees should be afforded 10 days to consider the terms of a draft written settlement agreement. This distinction allows an employer to set a short deadline for an employee to consider a settlement in principle (I.e. the main terms of the settlement, such as the termination payment), before they then provide the finer details to be set out in a settlement agreement. This should allow employers to avoid incurring the time and costs of preparing a draft settlement agreement until an employee has given the firm indication that they will proceed with the offer.
A further key point that arose in Mr Gallagher’s claim was that he believed he had been lured to the meeting under, what he felt were, false pretences. However, both tribunals accepted that this was OK (and avoided concluding that the employer had lied), as an employer could be justified in needing to find a reason to get an employee to attend a meeting or to join a call so that they can then have the protected conversation. This particular point perhaps demonstrates best how the tribunals’ decisions have made it a little easier for employers to initiate and conduct protected conversations, in that the tribunal demonstrates that they will give quite a wide interpretation to what amounts to reasonable behaviour and falls short of undue pressure. However, the key appears to be that the employer must be able to show that they are making a genuine attempt to set out options to the employee, and to allow them time to consider those options in a reasonable manner.