5 top tips for employers when entering settlement negotiations

Employers will usually enter settlement negotiations, on a without prejudice basis, when they are trying to terminate an employee’s contract. If those negotiations fail, then the conversations that have taken place cannot be used in any future litigation cases. 

The main reason behind this rule is to encourage employers and employees to come to an agreement without having to go to court. 

Parties must be in a dispute with one another in order to apply. If this is not the case, then their negotiations won’t be protected even if the phrase ‘without prejudice’ is used. 

However, if the parties don’t state outright that their negotiations were ‘without prejudice’ the rule will still apply if they were attempting to come to a resolution. 

The whole process can be complex, so Katie Bowen Nicholas, our employment lawyer, has put together these 5 top tips for employers entering settlement negotiations.

1. You can only have a without prejudice discussion with an employee if you're trying to resolve an existing dispute or if you anticipate that litigation is likely to occur if your negotiations break down. An exception to this, is protected conversations.
2. If litigation hasn’t started and there has been no threat of litigation commencing either, the tribunal court has to decide at what point that changed. Saying that conversations had were ‘without prejudice’ doesn’t protect negotiations in this circumstance.
3. Creating a settlement agreement for an employee to sign does not necessarily indicate a conflict. It has been said that a company preparing a draft settlement agreement is a sensible business precaution and ties up any loose ends, it doesn’t imply they are worried about litigation risks.
4. When in a dispute with an employee who has either initiated legal proceedings or threatened to do so, it is important to communicate about settlement proposals under the 'without prejudice' basis. Failure to do so may result in the tribunal having to determine the point, which can be time-consuming and may increase legal fees if you have representation.
5. You can have ‘protected conversations’ with an employee about them exiting your organisation, providing you follow certain rules. By abiding by the rule those conversations can’t be used against you. However, the protection is limited and only applies to normal unfair dismissal claims. These don’t include allegations of discrimination or whistleblowing. Furthermore, if during proceedings you try to pressurise the employee to accept your offer or exert any other improper behaviours, then the conversation may no longer be ‘protected’ and may be capable of being used as evidence.

For more information on how to enter settlement negotiations the right way, or how best to create a settlement agreement document, contact our Employment Law team today.