Firms have been warned not to be lulled into a false sense of security by a new law that allows them to open ‘without prejudice’ discussions with staff to end employment.
Employers have previously been able to hold those talks with employees but only once a dispute has arisen.
A new law means that confidential discussions can now be held before a dispute has arisen.
Coventry-based legal firm Band Hatton Button has welcomed the changes but say companies should not see it as a free-for-all.
Julia Woodhouse, a partner at the firm specialising in employment law, said: “It has always been the case that negotiations undertaken with the aim of concluding a settlement of an existing dispute have been protected by the “without prejudice” rule and continue to be so protected.
“This meant that statements made in order to try to conclude a settlement could not be used in any subsequent court or tribunal proceedings, except in very limited circumstances.
“However, it was often the case that employers would wish to have such discussions before a dispute arose and this was risky.
“The new law states that even where there is no existing employment dispute, the employer and employee may still discuss entering into a settlement agreement (formerly known as a compromise agreement) and these negotiations cannot be used in evidence in any subsequent unfair dismissal claim.
“A settlement agreement is a legally binding agreement which can be used to end the employment relationship on agreed terms.
“That said, employers still need to be careful as there are certain limitations to the new law.
“Confidentiality will only apply in respect of ordinary unfair dismissal proceedings; it does not apply where an employee brings proceedings for automatically unfair dismissal – for example, whistleblowing –discrimination or a breach of contract claim.
“Another limitation is that if either party engages in improper behaviour in connection with the settlement negotiations, evidence of pre-termination negotiations will only be excluded from evidence to the extent that the tribunal considers that this is fair.
“Some examples of improper behaviour are harassment, bullying and intimidation, physical assault or threat of it, victimisation, discrimination on prohibited grounds and putting undue pressure on a party.
“So while the law allows a common sense approach to discussions, employers must realise that this is not licence to flout employment law.”