From time to time you may send out a letter offering an employee, via a protected conversation, a settlement package. In a case called Meaker v Cyxtera Technology UK Ltd, the employee, in receipt of such a letter marked “without prejudice” believed that that letter constituted an effective dismissal. This is because the letter set out the particular date the employer was proposing that he would leave, the different payments he would get and when. He argued that this was a sufficiently clear letter to be a dismissal when it came to bringing an unfair dismissal claim under the Employment Rights Act 1996.
The relevance of this in the Employment Tribunal was whether he had brought his claim in time. If the “without prejudice” letter did, as he said, constitute a dismissal then his claim was going to be out of time. Alternatively, if the date of dismissal was the date on which he received payment in lieu of notice and holiday payment, then his claim was going to be in time.
The Tribunal agreed that the “without prejudice” letter was an effective letter of dismissal but the employee appealed. The Employment Appeal Tribunal agreed that that letter created a clear decision to dismiss, even though it was marked “without prejudice” and enclosed a draft Settlement Agreement, without terms providing for a mutual termination not having, in fact, been agreed. In effect, both the Tribunals viewed the letter as terminating the employee’s contract unilaterally.
As always the background facts were case specific – the employee had hurt his back and couldn’t do his job but wasn’t so severely affected that he met the test for income protection to kick in. There had been numerous discussions about what to do next. The employer sent the offer letter and draft settlement following a discussion with HR and actually processed the payment in lieu of notice even though agreement had not been reached.
The first moral of the story is never ever make payments in connection with a settlement agreement until it is all sorted!
This case has, however, given me reason to go back and review the standard kind of offer letter that I see on a regular basis: where the employers will state a termination date for example, the payment in lieu of notice that might be made, payment in lieu of holiday that might be made and an ex gratia payment that might be given in addition to things like reference and other benefits like outplacement counselling.
Employers run the risk that these letters can be seen as dismissal letters (any employee who has ever been on the receiving end of such an offer letter will tell you that they feel that it’s such a strong signal from the employer that the relationship is over and that they could not in fact continue). Is it worth drafting them in a different way to account for this risk? For example, instead of setting out a termination date, you may suggest to the employee that a leaving date would be agreed when the terms of a settlement agreement are agreed – this leaves it uncertain.
Secondly, the employer may wish to clarify that in no way should the employee take receipt of the letter as indicating any intention to bring their employment to an end.
You might also decide to say that holiday pay is something that would have to be agreed once the parties have discussed what the accrued holiday actually is.
Alternatively, you need to be aware that every time you do provide such an offer letter that it is open to the employee to argue that it brings an end to their employment, despite the fact that it is marked “without prejudice” and probably subject to a protected conversation.
Refreshing Law Ltd
27 February 2023