Protected Conversations: an exciting new initiative or counter-productive for employers?

By Robert Dixon, Employment Partner, Turbervilles Solicitors

July 11 2012 - The Coalition Government, in an effort to encourage the greater use of compromise agreements (or "settlement agreements" as they are now to be called), is planning to introduce into UK workplaces the concept of the "protected conversation". This is one of a number of initiatives to be found in the Enterprise and Regulatory Reform Bill, a package of measures designed to "scrap unnecessary red tape" for businesses.

The idea of the "protected conversation" is that employers can talk to their employees about possible termination deals or severance packages without having to worry about those conversations being referred to in subsequent Employment Tribunal cases if the discussions come to nothing and the employees then say they have been unfairly dismissed. This is because employees bringing unfair dismissal claims will not be allowed to tell the Tribunal about any previous "protected conversations" their employers had with them.

Small businesses, in particular, often do not have the time or resources to follow so-called "best practice" when it comes to dismissing staff. Removing under-performing employees can be particularly problematic because taking them through a series of warnings or a performance improvement plan inevitably uses up precious management time and is frequently disruptive.

In this type of scenario, the compromise agreement provides employers with the perfect solution. The company typically gives their employee some money and a decent reference and, in exchange, the employee agrees to leave quietly and to make no claims. Most of the time these compromise agreement dismissals work well for employers. However, the difficulty is knowing when it is safe to embark down the compromise agreement route and how to handle the process.

The intrinsic problem is that, practically speaking, once a compromise agreement has been broached there is no way back. Once you start discussing a person's possible departure and the terms on which they might go, how can you realistically expect them to carry on working for you as a committed employee if no deal can be reached? The relationship of trust will have been permanently damaged.

As the employer, you can sprinkle such discussions with expressions like "off the record" or "without prejudice" but if no compromise agreement is entered into, it will make no difference. In the real world, it will be impossible to pretend that those discussions never took place. The trust will have gone and it will be extremely hard for employer and employee to re-build an effective working relationship.

This means a badly-judged or mis-handled attempt to remove an employee through a compromise agreement can seriously backfire - with expensive consequences. You may end up paying well over the odds to secure the employee's signature on the compromise agreement. Worse, the employee may resign, say he was constructively dismissed, and claim substantial compensation for unfair dismissal, leaving you to fight the very Tribunal case you had been trying to avoid.

Moreover, in that Tribunal case, the earlier discussions you had with your employee, which you had intended to be held "off the record" or "without prejudice", may well turn out not to have been. If so, the Tribunal would hear all about the discussions and might decide you thereby made your employee's position at the organisation completely untenable.

The "protected conversation" is the Government's answer to this problem. It may seem like a good idea, but unless the legislation is robust and straightforward, the danger is that it will suffer the same fate as befell the infamous statutory disciplinary and grievance procedures. Forcing employers to follow strict procedures was a well-meaning idea introduced by the Labour Government but it had to be scrapped a few years later. It failed because the legislation was over-complicated and poorly drafted resulting in a mass of wasteful "satellite" litigation - technical arguments which often had nothing to do with the real areas of dispute.

The reaction of many employment lawyers to the draft legislation on "protected conversations" recently placed before Parliament suggests that there is much room for improvement. Whether Parliament will grasp the nettle remains to be seen.

In any event, though, it seems that the Government may be unwittingly sowing seeds of discord in workplaces up and down the country. "Protected conversations" may make it easier for businesses to persuade their employees to accept severance terms and sign settlement agreements, but they could also encourage employers to over-step the mark and then end up with embittered employees who refuse to sign up and, knowing they are no longer wanted, become more of a headache (in terms of prolonged sickness absence, etc) than they were before the abortive conversations took place.

Employers would also have to bear in mind, when deciding whether or not to hold a "protected conversation", that although the conversation might not spark off a constructive/unfair dismissal claim, it could still prompt a discrimination claim. This is because, if the employee were to complain to the Tribunal that he was discriminated against because of (for example) his age or race, at the hearing of his complaint he would be allowed to give evidence about the conversation. This would be the case even if the employer had made it perfectly clear at the time that it was to be a "protected conversation".

Because of these and other difficulties, the probability is that the "protected conversation" idea will turn out to be a damp squib. Employers will sooner or later realise it is not the panacea it might appear to be and will give it a wide berth.

The irony is that, in terms of changing employment laws to make life easier for businesses, the Government has already taken the step which is likely to have the single biggest impact. This is the increase in the qualification period for protection against unfair dismissal. New employees taken on after 5 April 2012 now have to complete 2 years' service before gaining protection. Previously the qualification period was one year. In practical terms, businesses will start benefiting from this change from April 2013 onwards.

Compared to that simple legislative tweak, the introduction of "protected conversations" is at best irrelevant tinkering and at worst a counter-productive measure for UK employers.

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