Protecting protected conversations (under s.111A ERA) - a recent EAT case

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05.12.2024

Glad tidings we bring for you (if you are an employer) ... These glad tidings come in the form of the recent case of Gallagher v McKinnon’s Auto and Tyres Limited, in which the Employment Appeal Tribunal (EAT) upheld the Employment Tribunal’s decision that pre-termination negotiations between the Claimant and the Respondent were protected conversations under s.111A of the Employment Rights Act 1996 (ERA) and therefore inadmissible as evidence.

The law

Before we get into the weeds of the case, a quick refresher on the law. S.111A of the ERA 1996 provides that evidence of pre-termination negotiations (which means any offer made or discussions held before the termination of the employment in question, with a view to it being terminated on terms agreed between the employer and the employee) will be inadmissible in ordinary unfair dismissal proceedings. S.111A is a useful mechanism for employers and employees to have frank conversations about an employment relationship that isn’t working and may come to an end.

However, this protection is subject to important exceptions. The first is that the protection only applies in ordinary unfair dismissal proceedings; it will not apply to automatic unfair dismissal or other claims, for example discrimination or whistleblowing. The second is that the conversation will not be protected if either party engages in "improper behaviour"; the Acas Code on Settlement Agreements (under section 111A of the Employment Rights Act 1996) provides a non-exhaustive list of what may constitute improper behaviour, including harassment and bullying, discrimination or the threat of physical assault.

It is worth noting that protected conversations are different to "Without Prejudice" (WP) conversations, although somewhat confusingly both rules can apply to the same conversation. "Without Prejudice" is a common law principle which prevents statements made in a genuine attempt to settle an existing dispute from being disclosed in legal proceedings in all types of claim (see our article on Without Prejudice here). There are also exceptions to the WP rule, including that a conversation will not be WP if there has been perjury, blackmail or other unambiguous impropriety; this is a narrower test (and therefore easier to argue against) than the "improper behaviour" test for protected conversations.

You may then ask, why would you rely on the protection under S.111A when WP applies to all claims and is easier to argue? The answer is that for WP to apply, there needs to be existing dispute, and this is not a requirement for protected conversations. Protected conversations can be held when there is no dispute between the parties, which was the case in Gallagher v McKinnon’s Auto and Tyres Limited.

Gallagher v McKinnon’s Auto and Tyres Limited

Mr Gallagher was employed as a branch manager and was on sick leave in June and July 2022. During his sick leave, the company determined that his role was at risk of redundancy. At Mr Gallagher’s return-to-work meeting, the company sought to have a protected conversation with him about the termination of his employment on settlement terms rather than commencing a redundancy process. Mr Gallagher was given 48 hours to consider the verbal offer. Mr Gallagher did not respond within that time and a redundancy process was commenced which resulted in Mr Gallagher being made redundant.

Mr Gallagher brough a claim for ordinary unfair dismissal and sought to use the conversation at the return-to-work meeting as evidence of his unfair dismissal. The company argued that this was protected under S.111A. Mr Gallagher argued that the conversations were not protected as there had been "improper behaviour".

The Employment Tribunal and, following Mr Gallagher’s appeal, the EAT, found that the conversations were protected as there had not been improper behaviour. In particular, the ET and EAT found that:

The fact that Mr Gallagher had only been given 48 hours to consider the offer was not improper behaviour as this was a verbal offer and if accepted a written settlement agreement would have been provided and additional time given for consideration of this. As a reminder, the Acas Code on S.111A (link above) states that employees should be given a minimum of 10 calendar days to consider the formal written terms of a settlement agreement and to receive independent advice, unless the parties agree otherwise.
The fact that Mr Gallagher was told that a redundancy process would commence if he did not accept the offer was not improper behaviour. Significantly, the tribunals found this was not the same as an employer saying before any form of disciplinary process has begun that if a settlement proposal is rejected then the employee will be dismissed (which is an example of improper behaviour under the Acas Code on S.111A).
The fact that Mr Gallagher was presented with the offer at the return-to-work meeting was not improper behaviour. The tribunals found that whilst it may not have been fair to Mr Gallagher to use the meeting to raise his possible exit, it was not improper. In coming to this decision, the tribunals looked at the surrounding facts of the meeting, including that the employer had not lied about the purpose of the meeting, the meeting was conducted calmly, the company provided additional information when requested quickly and Mr Gallagher was given time to consider the proposal. The tribunals found that the company had therefore not put "undue pressure" on him (another example of improper behaviour under the Acas Code on S.111A).

Key takeaways

The case demonstrates the courts’ support of protected conversations, in particular in allowing employers and employees to reach mutually agreed terms without the need for a legal dispute.

To ensure that S.111A will apply, employers should:

Familiarise themselves with the Acas Code on S.111A.
Consider the circumstances giving rise to the potential discussion (eg poor performance, redundancy etc), what claims might be brought by the employee if settlement fails, and whether it is advisable to raise pre-termination negotiations at this stage. For example, pre-termination negotiations raised in advance of a redundancy exercise which may or may not end in a redundancy are less likely to be open to challenge than negotiations raised in advance of a disciplinary process.
Give careful thought about how pre-termination discussions should be handled. Ideally, the employee would be told that the employer wishes to have a protected conversation about the possibility of an agreed exit. The meeting should be calm and scheduled for a reasonable amount of time to allow the employee to digest the proposal. This case shows the importance of the employer responding to reasonable requests for information promptly. Although not a legal requirement, Acas advises it is good practice to allow the employee to be accompanied to the meeting by a work colleague or trade union representative.
The employee should be given a reasonable period of time to consider the proposal. As a general rule, the employee should be given a minimum of 10 calendar days to consider formal written settlement terms and take legal advice.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.