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Protected Conversations and Settlement Agreements

protected conversations

Employers can find themselves in a situation with an employee that simply isn’t working out. There may be a fair reason to terminate employment, but the employer doesn’t want the incur the management time, hassle and litigation risk of a formal disciplinary, absence or performance procedure.

Protected conversations are “off the record” discussions aimed at just such situations – usually offering the employee compensation to leave their job. Protected conversations should be carefully prepared and carried out but done well can be a useful way to part terms with an employee on a relatively amicable basis, reducing litigation risk.

We can coach you in how to hold a protected conversation to minimise the risk of claims, strengthen your negotiating position and maximise the chances of reaching settlement.

Settlement Agreements formally record the agreement and prevent employees from bringing a claim. To be effective, the employee must receive their own independent legal advice on the Settlement Agreement.

We can draft Settlement Agreements and negotiate with the employee’s lawyer to reach a binding agreement. We will advise you what terms would be acceptable to a well advised employee, anticipating issues from our work advising employees.

If you require specialist legal advice or assistance relating to protected conversations or settlement agreements get in touch with one of our experienced Employment Solicitors by calling 0800 086 2929, emailing info@elitelawsolicitors.co.uk or by completing our Free Online Enquiry Form.

What is a Protected Conversation?

A Protected Conversation is a conversation between you and your employee to explore whether they agree to leave your employment on mutually agreeable terms. These conversations cannot be discussed before an Employment Tribunal hearing a claim for unfair dismissal, except in cases of automatic unfair dismissal.

If there is improper behaviour, an Employment Tribunal can decide that the employee could in fact refer to that conversation. To be protected therefore, there should be no inappropriate pressure to accept proposed terms, such as imposing an unrealistic timeframe.

What does “Without Prejudice, Subject to Contract” mean?

“Without Prejudice” is a legal principle that prevents statements made in a genuine attempt to resolve a dispute being discussed before an Employment Tribunal or court. It may be that Settlement Agreement negotiations are Without Prejudice if they are attempting to resolve an existing dispute. Protected conversations were introduced to allow employers to hold discussions where there is no existing dispute, with a similar restraint on placing the discussion in evidence before the Employment Tribunal.

“Subject to Contract” is usually used to make clear that an agreement for an employee to leave in return for compensation is not final until both the employee and employer have agreed the full terms of the Settlement Agreement.

How long should the employee be given to decide whether or not to accept a Settlement Agreement?

The ACAS Code of Practice on Settlement Agreements expressly confirms that employees should be given a minimum of 10 calendar days to consider the proposed formal written terms of a Settlement Agreement and receive independent legal advice.

Can we include an NDA?

Most Settlement Agreements contain confidentiality clauses, commonly known as NDAs (Non Disclosure Agreements). We can advise whether NDA clauses are appropriate and suggest wording.

Many Settlement Agreements also contain restrictions on making derogatory or detrimental comments about the employer. Again, we can advise whether these clauses are appropriate and suggest wording.

What are common terms in a Settlement Agreement?

Settlement Agreements usually contain a number of promises, known as warranties, as well as the restriction on bringing any claims against the employer. Common promises are:

  • To abide by restrictions in the Contract of Employment on confidentiality, poaching clients or colleagues or acting in competition with the employer
  • The employee has not done anything or failed to do anything that would justify dismissal without notice
  • At the date of signing the Settlement Agreement, the employee has not received or accepted an offer of alternative employment
  • To return company property and delete copies of documents on personal devices
  • To hand over passwords to company software
  • To continue to assist with litigation or investigations after employment has ended, if needed
  • To keep the existence and terms of the Settlement Agreement, and sometimes also the circumstances leading to the termination of employment, confidential
  • Not to make derogatory or detrimental statements about the employer
  • The employee is not aware of any claims not listed in the Settlement Agreement
  • The employee is not aware of any claims for personal injury or relating to their pension

Is a Settlement Agreement payment tax free?

Some, but not all, payments can be made tax free provided that they are compensating the employee for loss of employment, up to a limit of £30,000. Payments made to cover notice pay, accrued holiday or pay owed to the employee are subject to tax and national insurance in the usual way.

We will draft a Settlement Agreement that correctly identifies payments as tax free or taxable and ensure that no other clauses in the Settlement Agreement place genuinely tax free payments at risk of scrutiny from HMRC.

How we can help with Protected Conversations and Settlement Agreements

At Elite Law Solicitors our experienced Employment Solicitors can provide guidance and support when dealing with workplace disputes, including the use of protected conversations and drafting of settlement agreements.

If you require specialist legal advice or assistance relating to protected conversations or settlement agreements get in touch with one of our experienced Employment Solicitors by calling 0800 086 2929, emailing info@elitelawsolicitors.co.uk or by completing our Free Online Enquiry Form.

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