Improper behaviour: what is “undue pressure” in protected conversations?

Pre-termination negotiations under section 111A of the Employment Rights Act 1996 – invariably referred to by the better-known shorthand of “protected conversation” - and without prejudice discussions are both tools used to facilitate settlement discussions between employers and employees. However, it’s important that employers understand both their differences and limitations.

How is s. 111A different?

Provided the statutory criteria are met, s.111A lets employers have discussions with employees with a view to reaching a mutually agreed termination of employment without those discussions being disclosable in an ordinary unfair dismissal claim. This statutory protection was introduced in 2013 to give employers greater flexibility around such discussions.

This legislation is important for employers as the without prejudice principle only makes discussions inadmissible where they are an attempt to settle a pre-existing dispute between the parties. Often when employers want to discuss an agreed exit, there isn’t such a dispute.

There are, however, exceptions where protected conversations can be referred to in evidence, in particular where any part of the discussion is improper or connected to improper behaviour. The Acas Code of Practice on Settlement Agreements, which an Employment Tribunal is required to take into account, provides some examples of impropriety or improper behaviour, but these are not exhaustive. The decision in Gallagher provides rare case law clarity on where that line might be drawn.

How were these discussions conducted?

Mr Gallagher, a branch manager, took a period of sick leave in the summer of 2022. While he was on leave, the employer found it could cover Mr Gallagher’s role.  It decided to offer him an “enhanced redundancy” package of £10,000 if he agreed to terminate his employment under a settlement agreement. 

To initiate discussions, Mr Gallagher was invited to a meeting and told that the purpose was to discuss his return to work. In fact the offer was put to him, and he was given 48 hours to decide whether he wanted to accept. He refused, was ultimately dismissed, and subsequently claimed for unfair dismissal.

Was this covered by s. 111A?

Mr Gallagher tried to rely on evidence from the meeting and texts relating to the negotiations, arguing that his employer’s behaviour was improper and therefore the discussions were outside the scope of s.111A. 

The Employment Tribunal disagreed. Mr Gallagher appealed, arguing that the following amounted to improper behaviour by the employer:

• Being told that his role would be redundant if he did not accept the proposal; 
• Being misled about the purpose of the meeting; and
• Only being given 48 hours to accept the proposal.

Decision not perverse

The EAT dismissed the appeal on all three grounds.

Pre-determined outcome

An example of “undue pressure” given in the Code is where, before a disciplinary process has begun, the employee is told they will be dismissed if they do not sign the settlement agreement. The EAT drew a distinction between Mr Gallagher being told his role would be redundant and an employee being told that they would be dismissed.  The fact that the Code example related to a disciplinary process, not redundancy, was important:

• If, before a disciplinary process had begun, an employer said an employee would be dismissed if they did not accept the proposal, the process would seem predetermined. The employee would then feel undue pressure to sign as they would have no faith that a fair investigation and disciplinary process would be followed.
• In contrast, stating that a redundancy process will commence or indicating that a role is redundant does not necessarily mean that an employee will be dismissed – if the role is redundant, they may be redeployed.

Subject of the meeting

The Employment Tribunal had found that, while “mislabelling” the meeting was unfair to Mr Gallagher and caused him initial shock, it was not improper. This was balanced against the fact that employees are unlikely to react well to an invitation to a protected conversation and that the employer’s behaviour mitigated the shock: they were calm in the meeting, gave Mr Gallagher time to discuss the offer with his family and, following the meeting, provided him with requested information quickly. 

The EAT found that there was nothing perverse about the Employment Tribunal considering all of these factors together and reaching the conclusion it did. It was not a question of whether the process was fair in all the circumstances – akin to an unfair dismissal test. This was a narrower question of impropriety. 

Timing to consider an offer and distinction between an oral offer and a written proposal

The Code says that employees should be given reasonable time to consider terms of a written settlement agreement and get independent advice on those terms, recommending a 10-day minimum period.  Mr Gallagher argued that the two days he was given to signal his acceptance of the offer was therefore unreasonable.  

The EAT disagreed.  The deadline of 48 hours was only for Mr Gallagher to respond to the verbal proposal -  he would then have a longer period to consider the written terms. The 48 hour deadline for the in principle acceptance did not subject Mr Gallagher to undue pressure.

Circumstances as a whole

Finally, the Claimant argued that the combined effect of all these factors pointed to undue pressure and therefore impropriety. The EAT accepted the principle that relevant factors should be looked in the round but on these facts they were not enough to amount to undue pressure. 

What does this mean for employers?

This is good news for employers and validates some common practices, although it does not give carte blanche to pile on the pressure in protected conversations – the EAT itself noted that a different tribunal judge might have seen things differently. It does, however, provide some clarity as to when an employer’s conduct might cross the line from persuasion to undue pressure:

Key pointers from this case are:

• Timing: It is very common for employers to ask employees to signal whether they want to accept an offer “in principle” in a protected conversation within a relatively short timeframe, such as two or three working days.  This decision is welcome confirmation that this will generally be OK as long as a longer period – up to the 10 days referred to in the Code – is allowed to enter into the written settlement agreement. 
• Don’t pre-determine outcome: The decision is also a reminder of the critical importance of avoiding making any statements – regardless of the underlying reason for the discission – that indicate that a decision to dismiss an employee has already been made. However, you can advise that a redundancy or disciplinary process will commence if the proposal is not accepted. 
• Label meetings carefully: Although there are no hard and fast rules, this is something to handle with care. Describing the meeting as a “without prejudice” conversation may not only be unclear to a lay employee, it also risks being misleading. However, a general description (e.g. to discuss next steps for employment) may avoid such allegations. The Code also recognises that a meeting about one thing can legitimately shift to a discussion about settlement.
• No need for a formal “invitation”: It is generally preferable for protected conversations to take place with relatively little formality or prior warning, and this decision is useful validation of that.

For further information on entering into settlement agreements view our Inbrief on settlement agreements.  

Gallagher v McKinnon's Auto and Tyres Limited [2024] EAT 174 - judgment available here.