Clients are often concerned regarding implementing a performance management process because a fair process can take a long time (potentially three to six months), substantial management and HR time will be involved in managing the process, it can be uncomfortable for both parties and cause distress to the employee. One option that employers may wish to consider in such circumstances is having “pre-termination negotiations” with the employee.
Pre-termination negotiations
Over four years ago, the law was changed to introduce “pre termination negotiations”. Under section 111A of the Employment Rights Act 1996 “pre termination negotiations” mean any offers to negotiate or discussions held between an employer and an employee, before the termination of employment, with a view to the termination of that employee’s employment on terms agreed between the parties.
The new concept of “pre termination negotiations” was introduced because of issues with the “without prejudice” principle. The “without prejudice” principle provides that oral or written statements made in a genuine attempt to settle an existing dispute between the relevant parties are not admissible as evidence before a Court or Tribunal. It is important to note that this principle only applies if there is an existing dispute between the employer and the employee. The problem with the “without prejudice” principle in the employment context is that where, for example, an employer considers that there are issues in relation to an employee’s performance there may be no existing dispute between the employer and employee and the employee may not even be aware that there are concerns with his or her performance. It was risky in such a situation, before section 111A was introduced, for employers to have exploratory discussions with employees regarding a potential departure as these discussions could be admissible in subsequent Tribunal proceedings on the basis that the “without prejudice” principle did not apply. This stifled candid discussions where there were employment problems.
Section 111A and its conditions
“Pre-termination negotiations” are inadmissible in subsequent Tribunal proceedings for unfair dismissal. This means that if you have a pre-termination discussion with an employee and you and the employee are not able to agree departure terms, the employee (and you) cannot refer to the “pre termination negotiations” in any later Employment Tribunal proceedings.
It is important to note the ambit of section 111A:
- Section 111A only applies to an unfair dismissal claim or to a constructive unfair dismissal claim. If there are any risks that the employee may have a discrimination or whistleblowing claim, we would not therefore recommend that Section 111A is used since the conversations would be admissible in any subsequent Tribunal claim for discrimination and/or whistleblowing.
- Section 111A does not apply if there has been ‘improper behaviour’ in anything said or done in relation to the settlement negotiations. There is no exhaustive list as to what constitutes ‘improper behaviour’. However, it includes all forms of harassment and victimisation and putting undue pressure on a party, for example telling the employee that he or she will be dismissed if the settlement proposal is rejected.

How to have a pre-termination discussion with an employee
We recommend the following:
- You give careful consideration to what you are going to say to the employee before you meet with them and you prepare a script.
- You begin the meeting explaining that you wish to have a confidential settlement discussion with them.
- You outline what the potential issues are with the employee’s performance and explain that one option (rather than having to go through a formal performance management route) is for you to propose some settlement terms to the employee.
- You set out what the proposed settlement terms are.
- In accordance with the ACAS Guidance on Settlement Agreements under section 111A of the Employment Rights Act 1996 (“the ACAS Guidance”) employees are given a minimum of 10 calendar days to consider the offer.
- You offer to meet with the employee if they would like to discuss during the negotiation period. The ACAS Guidance sets out that employees should be allowed to be accompanied at this meeting by a work colleague or trade union representative.
- No undue pressure is placed on the employee and he or she is informed that this is just an option and if he or she would prefer you can proceed with the formal performance management route.
- You confirm to the employee in writing what you have discussed.
Settlement Agreements
The settlement terms should be covered in a Settlement Agreement whereby the employee is required to take independent legal advice regarding entering into the Settlement Agreement. This is because a Settlement Agreement is the only effective way of settling statutory employment claims such as unfair dismissal. Otherwise, you take the risk that you make the settlement payments to the employee and the employee still brings a claim in the Employment Tribunal.
Summary
Given the various conditions that apply to “pre-termination negotiations”, it is perhaps understandable that some employers may not have considered “pre-termination negotiations” as an option or are wary about them. However, provided the employer conducts “pre-termination negotiations” in accordance with the ACAS Guidance, the discussions could encourage an amicable and swift settlement which avoids a protracted formal process and significant expenditure of management time.
Whilst we hope this article has given you a feel for some of the considerations in respect of “pre-termination negotiations”, we would always advise that you take specific legal advice in respect of them. If you would like to discuss any of these issues, please contact any member of the Employment Team.