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Confidential Negotiations

Confidential Negotiations

This is fine if they are a relatively new employee as they won't ordinarily be able to bring a claim for unfair dismissal if you decide to dismiss them with notice (although you should be wary of potential claims for discrimination or automatic unfair dismissal). But what if the employee does have the requisite service to claim unfair dismissal - if you can't quite put your finger on the reason it's not working out it will be difficult to justify the decision to dismiss in an Employment Tribunal?

From the 29 July 2013 an alternative option to dismissal has been introduced - confidential negotiations leading to a 'Settlement Agreement'. The new legal provisions make it permissible for an employer (or an employee) to initiate discussions about terminating employment on agreed terms. Until now the possibility of a settlement arrangement could only be brought up where there was already an existing dispute (for example a grievance brought by the employee or where dismissal had already taken place).

How it works:

An employer (or employee) can suggest confidential negotiations at any point. The original offer does not need to be in writing but any final agreement must be.

The fact that negotiations took place, along with whatever is said during the negotiations (subject to some rules outlined below), cannot be referred to in any Employment Tribunal proceedings that may arise out of the employment relationship at a later date.

If the parties are able to agree terms then the employment can be terminated by mutual agreement, the provisions of which are contained in the Settlement Agreement. These normally provide for some form of severance payment and / or a reference of agreed wording in return for the employee waiving his/her right to bring claims in the Employment Tribunal against the employer.

For the Settlement Agreement to be binding the employee must take independent advice on the terms, usually from a solicitor or trade union representative, the cost of which should be borne by the employer.

Care needs to be taken over the content of the Settlement Agreement to ensure it effectively compromises all and any claims the employee may have against the company.

A few rules:

  1. The right to instigate confidential negotiations only arises in relation to potential ordinary unfair dismissal situations. Where the desire for dismissal is for discriminatory reasons, or because the employee has alleged discrimination then the negotiations will not be confidential.
  2. The same applies where the wish to terminate employment arises from the protected disclosures the employee has made (e.g. about breaches of health and safety rules, fraudulent conduct etc.) or if they have asserted a statutory right (e.g. to their minimum holiday entitlement, or to be paid the minimum wage etc.).
  3. If either party acts 'improperly' during the negotiation process then all or part of the negotiations may not be confidential, to an extent determined by the Employment Tribunal. For example if the company puts undue pressure on the employee to accept their offer, or the employee threatens to publically disparage the business if it does not accept his/her terms.
  4. Informing an employee that unless they accept the proposal they will be sacked would amount to improper conduct. You can however set out the factual basis for why the offer was made (e.g. perceived poor performance) and the factual alternatives (e.g. formal proceedings that may lead to dismissal).


ACAS has published both a statutory code of practice and further non-statutory guidance on confidential negotiations and Settlement Agreements which are vital reading for any employer considering this option which can be downloaded here:

Acas - Settlement agreements

If you are considering commencing confidential negotiations with the aim of entering into a Settlement Agreement call us now on 0114 241 7092 for advice, assistance and to get an Agreement drawn up which will meet the statutory requirements.

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I don't have Microsoft Office or Microsoft Word, what should I do?

If you don't have Microsoft Office, or Microsoft Word installed on your PC or Mac, don't worry - you can still use our products. You can get a free alternative from Open Office.

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To download and install Open Office;

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