Gallagher v McKinnon Auto and Tyres Ltd – Understanding pre-termination negotiations

Since 2013 employers have been able to have confidential exit discussions with their employees, even if the parties were not already in a dispute, without the risk of those discussions being referred to in any subsequent unfair dismissal claim (s111A Employment Rights Act 1996). These discussions are referred to as ‘pre-termination negotiations’ or ‘protected conversations’.

Importantly, the inadmissibility (and therefore the legal protection) that applies to these negotiations only applies to ordinary unfair dismissal claims, it does not operate in respect of complaints of ‘automatic’ unfair dismissal such as whistleblowing. It also does not operate in respect of complaints of discrimination or claims relating to breach of contract.

There are some other exceptions too. A tribunal can admit these negotiations into evidence if anything said or done is ‘improper or connected with improper behaviour’. The question of improper behaviour was the subject of an Employment Appeal Tribunal (EAT) decision in Gallagher v McKinnon Auto and Tyres Ltd [2024] EAT 174 (25 September 2024).

Gallagher v McKinnon Auto and Tyres Ltd: the case

The company employed Mr Gallagher as a branch manager for almost five years. Having managed successfully to cover his role during a spell of absence during June and July 2022, the directors considered they could continue without his role.

Mr Gallagher was invited to a meeting on 1 August 2022. The reason for the meeting was described as a discussion concerning his return to work. After a brief discussion about his health, Ms McKenzie, one of the directors present, set out the company’s proposal to him. She explained that, if he accepted an offer of £10,000, the parties would sign a compromise agreement; but, if he rejected it, the company would “go through a redundancy procedure”. Mr Gallagher was given 48 hours to consider the proposal.

Mr Gallagher did not accept the proposal in the stated time period and he was invited to a formal meeting on 4 August 2022 to discuss his potential redundancy and the possibility of suitable alternative employment. The company subsequently dismissed him. Mr Gallagher brought proceedings against the company for unfair dismissal, and he sought to rely on the discussion on 1 August 2022 as evidence of procedural unfairness.

The Employment Tribunal arranged a preliminary hearing (PH) to decide whether Mr Gallagher’s evidence of what had been said at the meeting on 1 August 2022 was admissible. The Judge found both the fact and content of the pre-termination negotiations to be inadmissible.

Mr Gallagher appealed the Tribunal’s decision arguing that it was perverse for the ET to conclude that he was not subjected to undue pressure and that as a consequence the conversation was no longer a “protected conversation”, and it should be allowed in evidence. The improper behaviour he relied on was being:

• told during the discussion that his role could be covered, that he had been made redundant and that, effectively, if he didn’t accept the offer he would be dismissed.
• misled as to the purpose of the meeting and the ‘surprise element’ exerted further undue pressure upon him.
• given only 48 hours to respond to the settlement proposal.

EAT decision

The EAT dismissed each of Mr Gallagher’s three grounds of appeal. Specifically:

1. Although Mr Gallagher was told that his work would be covered by others going forward, he was not told he would be dismissed if he rejected the offer but that a redundancy process would commence. As part of that the company would need to explore whether there were any suitable alternative redeployment opportunities.

2. Whilst the judge at first instance had thought it unfair to invite Mr Gallagher to a meeting under false pretences, it didn’t rise to the level of impropriety that could make the discussion admissible as evidence. The ACAS Statutory Code of Practice on settlement agreements (the ACAS Code) expressly acknowledges that how a settlement proposal is made can vary depending on the circumstances.

3. The 10-day recommendation in the ACAS Code, is for the employee to be given 10 days to consider the formal written terms of the settlement agreement. If the claimant had accepted the verbal offer within the 48 hours the negotiations would have continued and, at some point, he would have been presented with written terms of a settlement agreement to consider. The 48 hours to consider the verbal offer was not found to subject the claimant to undue pressure.

Next steps?

It is now for the ET to decide the claimant’s substantive complaint of unfair dismissal without regard to the evidence that the ET Judge properly ruled to be inadmissible.

Comments

Whilst the position advanced by the employee did not succeed, better planning for, and handling of, the 1 August 2022 meeting by the company may have avoided the requirement for a PH to determine the admissibility, or otherwise, of it.

We would recommend making a number of decisions in advance of holding a protected conversation, ideally to include determining:

• who is best placed to lead the pre-termination discussion;
• when to have the discussion including whether to give notice of it to the employee (good practice, but not a legal requirement);
• whether the employee will be offered the right to be accompanied (good practice, but not a legal requirement); and
• whether to have a settlement agreement pre-prepared and ready to hand over at the meeting.

The personalities involved and the particular facts and circumstances will all be relevant factors in making these decisions.

The meeting itself should ideally begin with an explanation that it is intended to be a protected conversation and that the conversation cannot be raised in any subsequent legal proceedings.  Further, the reason for making the approach should be explained. If the employee has no idea their performance or conduct isn’t meeting expectations you may be met with shock and defensiveness that is not conducive to reaching an amicable agreement.

If the employee is interested in exploring settlement put the offer in writing by way of a settlement agreement (if you haven’t already) and allow the employee at least 10 calendar days to consider, and take independent legal advice, on it.

Further guidance and support

For advice on pre-termination negotiations, settlement agreements and/or for more tips to help maximise the chances of successfully resolving a situation with a protected conversation, the Brachers Employment team can assist.

Our employment law solicitors are based in Maidstone and Canterbury and are ready to help with any legal advice you may require so please get in touch today.

This content is correct at time of publication