Hogan Lovells assesses impact of new rules on confidential settlement discussions

On 29 July, another significant change to employment law comes into force under the Enterprise and Regulatory Reform Act. The introduction of ‘confidential negotiations’ before the termination of employment is designed to make it easier for employers to raise the prospect of an agreed termination of employment where an employment relationship is not working out. However, the protection offered by the new rules is far from watertight, according to Hogan Lovells.

At the moment, discussions between employers and their employees that are designed to bring an employment relationship to an end on agreed terms may be ‘without prejudice’. If they are, the discussions cannot be referred to in subsequent employment tribunal proceedings. However, discussions will be ‘without prejudice’ only if they are a genuine attempt to settle an existing dispute between the parties. In the employment context, it is often unclear whether there is an ‘existing dispute’ between the parties so that without prejudice privilege can apply.

The government is introducing ‘confidential pre-termination negotiations’ to try and allow employers to raise the prospect of an agreed termination with an employee (for example in the context of concerns about poor performance) even where without prejudice privilege would not apply. The new rules say that offers or discussions held before termination of employment with a view to a termination on agreed terms are not admissible in unfair-dismissal claims…

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