How to conduct a pre-termination negotiation
This is a guest blog about pre-termination negotiations or PTNs by Blair Adams, an employment lawyer at law firm DMH Stallard.
In July 2013, new legislation introduced the concept of pre-termination negotiations (PTNs). PTNs are confidential and will not be admissible in certain tribunal proceedings, the intention being to make it easier for employers to have off-the-record conversations with employees about agreed terminations. In addition, conducting a PTN and concluding a settlement agreement are now the subject of a new ACAS Code on Settlement Agreements. The Code is not legally binding, but it will be taken into account by tribunals.
What is a PTN?
It is simply a discussion about terminating employment on agreed terms. There are no particular formalities required under the legislation, but it would be prudent to establish with the employee at the beginning that you are starting a discussion or sending them a letter on the basis that it falls with the scope of a PTN.
What is the benefit?
It is an opportunity to try to agree terms with an employee before taking any formal steps, such as a performance management review or a disciplinary procedure. In contrast to the existing “without prejudice” rule, a PTN does not require there to be a pre-existing dispute.
What are the risks?
• loss of confidentiality;
• constructive dismissal claims – nothing in the legislation prevents an employee claiming constructive dismissal if you suggest that they should leave. In some cases, employees could use this to “manufacture” a wrongful dismissal that allows them to escape contractual restrictions.
How far does the confidentiality go?
• the confidentiality only applies in claims of ordinary unfair dismissal. Evidence of what happened in a PTN could still be admissible in other claims, such as discrimination or automatic unfair dismissal;
• all confidentiality is lost if one party is found to have behaved improperly in the course of a PTN;
• the confidentiality relates to employment tribunal proceedings – nothing in the legislation prevents an employee telling a third party about a PTN; and
• it can be removed in relation to costs applications in the tribunal – but a party needs to reserve its position on this at the time of the PTN.
This is defined in the Code. It is ultimately for a tribunal to decide what amounts to improper behaviour, but the Code provides examples. These include the obvious (physical assault, harassment, victimisation and discrimination, bullying and intimidation) and the concept of “undue pressure”.
According to the Code, undue pressure includes:
• failing to allow a reasonable time for consideration of a settlement agreement (the Code suggests 10 calendar days is the minimum period);
• saying that if a settlement is not reached the employee will be dismissed (although the Code says it will not be improper to set out in neutral terms the “likely alternatives” to settlement); and
• an employee threatening to damage an employer’s public reputation if a settlement is not reached.
Concepts such as intimidation and undue pressure are ill-defined – expect disputes about them in the near future. For example:
• would a statement by the employer that the employee will get a less favourable reference unless terms are agreed amount to improper behaviour?
• could an employee claim to have been unduly pressured if you ask them to respond to a settlement agreement within fewer than 10 days?
The Code suggests that the right to be accompanied should apply during a PTN, although this is not a legal requirement and so the employee cannot insist on it. Many employers will want to ignore the suggestion, the risk being that they will be found to have behaved improperly.
Without prejudice confidentiality
PTNs may also fall within the scope of the existing without prejudice rule. In most cases, employers will want to use both labels if they can.
On 29 July, compromise agreements were officially renamed “settlement agreements”.
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