When an employee’s future is on the menu …

Citation

Pitt, M. (2008), "When an employee’s future is on the menu …", Human Resource Management International Digest, Vol. 16 No. 6. https://doi.org/10.1108/hrmid.2008.04416fab.001

When an employee’s future is on the menu …

Article Type: Employment law outlook From: Human Resource Management International Digest, Volume 16, Issue 6

More than 60 percent of personnel managers spend over a fifth of their working time dealing with employment-law issues, according to a Chartered Institute of Personnel and Development survey.

Against this background, it is unsurprising that where an employee’s position is under threat – for example because of disciplinary matters or questions about the his or her ability to do the job – many employers choose to discuss the available options openly with the employee and suggest that a suitable compensation payment might be made if he or she were to choose to leave.

The aim is to avoid prolonged legal proceedings that can swallow up even more precious management time and resources. And this can indeed be a quick and effective short cut to a settlement if the employee accepts the offer.

But what if the employee rejects it, resigns and claims unfair constructive dismissal? The employer may by then have said a number of things about the employee’s future with the organization – or, more likely, lack of it – that would have been better left unsaid.

Fortunately, a rule exists that makes it possible for parties in a legal dispute to talk openly about how they can resolve it, without having to put their case in jeopardy. The content of discussions to which the so-called “without prejudice” rule applies cannot be used in evidence in a court or tribunal. But there are strict rules about when “without prejudice” applies.

First, there must be a genuine dispute between the parties and the negotiation must be a genuine attempt to settle the dispute. And a tribunal would be unlikely to judge that a dispute exists where employer and employee are in the early stages of discussing a package and the employer has not formally decided to dismiss the employee. In fact, the Employment Appeal Tribunal decided in one recent case that there was no dispute even when the employer told the employee that her job was no longer viable and it would be to everyone’s advantage if her employment were terminated. I believe that an employer can rely on the “without prejudice” rule only when he or she has fully decided to dismiss the employee.

Secondly, the “without prejudice” rule does not protect allegations of unlawful discrimination in the workplace. This is hardly surprising. An employer who says, for example, “We don’t want you here because you are black,” or “We want to be rid of you because you are a woman” must always expect to face the full legal consequences.

There are some similarities between the “without prejudice” rule and the “memorandum of understanding”. Both recognize that there may be some situations that seem to lend themselves, at least in the first instance, to verbal rather than written agreements.

An HR director may decide, for example, to discuss an employee’s future over lunch. The wine flows, the food is good and both parties seem to agree on the terms of a deal – perhaps, on the positive side, for the employee to be promoted, to take on extra responsibilities or be paid more or, on the negative side, to surrender the company car, to take garden leave or to seek out another employer.

Both probably believe that they have considered all the important issues. Both may even have taken their own notes of the conversation. But there may well be legally significant matters that were not fully discussed, or which the two parties interpret differently when they get back to the office.

The memorandum of understanding is a tool enabling business people to agree that they have the broad outlines of a deal but that the detail needs to be worked out.

It should identify which clauses are binding and which are not. The exact terms of any deal will not usually be made binding at this stage. It may, however, be useful to include binding clauses on confidentiality and on a cut-off date by which the deal will expire if not confirmed in a legally binding agreement.

With such knowledge behind them, both parties can go on to eat the rest of the lunch in relative comfort – and be less likely to suffer indigestion later in the afternoon.

Mike PittMike Pitt is an employment-law partner at UK solicitors Pearson Hinchliffe. He can be contacted at michael.pitt@pearson-hinchlif.co.uk