In today’s email, I gave you some general tips on how to initiate settlement negotiations. However, when it comes to your first meeting with the employee, the exact process you follow depends on whether you’re already in an active dispute with them or not.

In this case, at the start of your meeting with the employee, it’s important to say that it is being held on a ‘without prejudice and subject to contract’ basis. Explain that this means you and the employee can speak freely and whatever is said cannot be used against each other in legal proceedings if no settlement occurs. 

'Subject to contract’ means that the final written and signed settlement agreement is binding. Nothing agreed verbally is binding until it is signed. 

Similarly, if you are putting anything relating to the settlement in writing, then write ‘without prejudice and subject to contract’ at the top. This means that any offer made in the correspondence is off the record and subject to the employee agreeing to the terms of a wider agreement – which will require them to waive their right to make a legal claim.

If you want to talk to the employee about exiting the organisation but there is no dispute (yet), the 'without prejudice' rule does not apply. So, any conversation about settling would be at risk of being disclosed in any legal claim. Even worse, it could be relied upon as poor conduct by the employer in and of itself – giving rise to claims. 

This is where ‘pre-termination discussions’ come in. Under section 111A of the Employment Rights Act 1996, you can make a settlement offer to an employee before dismissal and before any dispute arises. The facts and details of the conversation can't be used in later ‘ordinary’ unfair dismissal proceedings – unless you have acted improperly. 

However, in contrast to the without prejudice rule, if the employee brings any other type of employment claim, then the discussion is still disclosable. I therefore recommend that, even if you hold a pre-termination discussion, you also use the language of ‘without prejudice’. Once you have held that first meeting to put your cards on the table, you’re likely to be in a ‘dispute’ anyway, so it’s a good idea to reference both. 

You must be very careful about what you say in pre-termination discussions and be on red alert for anything the employee says which might take the situation outside of the ordinary unfair dismissal realm and bring in any aspects of discrimination or automatic unfairness.