Employment & Pensions Blog: Protected conversations following Gallagher v McKinnon Auto and Tyres

It is common for employers and employees to negotiate an employee’s exit from the business, usually as an alternative to going through a formal disciplinary, capability or redundancy procedure. On the condition of signing a settlement agreement, the employee typically receives a compensation payment in return for their employment coming to an end. 

These negotiations are more commonly known as “protected conversations”, which are ‘off the record’ discussions. These allow an employer to discuss the possibility of bringing the employee’s employment to an end, without that conversation being used against them if the employee later brings an unfair dismissal claim.    

However, there are limits on the use of “protected conversations”. One of the important limits is that the employer cannot behave in an improper way. The question of improper behaviour during a “protected conversation” was the subject of a recent Employment Appeal Tribunal decision in Gallagher v McKinnon Auto and Tyres. 

The Employment Tribunal 

For almost five years Mr Gallagher worked as a Branch Manager for McKinnon Auto and Tyres. He was unwell for 2 weeks with Covid, came back to work for a week, but then broke his foot and was signed off again - this time for over a month. During Mr Gallagher’s absence, his employer discovered that they no longer needed a Branch Manager. 

Mr Gallagher was asked to attend a ‘return-to-work’ meeting to discuss his absence. However, at the meeting he was told that his work could be covered elsewhere, and he was offered a £10,000 settlement that would see him dismissed by reason of redundancy. Mr Gallagher was given 48 hours to accept it and he was told that if he didn’t, the company would then begin a redundancy procedure. He declined the offer and was subsequently made redundant. 

Mr Gallagher brought a claim for unfair dismissal and he sought to rely on the conversation where he was offered £10,000 as evidence that the decision to terminate his employment had already been made before any consultation had begun. 

The Employment Tribunal refused to allow Mr Gallagher to introduce the £10,000 settlement offer as evidence on the grounds that the offer was made during a “protected conversation”. 

The Employment Appeal Tribunal

Mr Gallagher appealed the Tribunal’s decision on the grounds that his employer had behaved improperly and put him under undue pressure when the settlement offer was made. He argue that as a result, the conversation was no longer a “protected conversation”, and it should be allowed in evidence.  The improper behaviour he relied on was:

1. The meeting was set up under false pretences in that it was misrepresented as a “return to work” discussion.   
2. He was told during the discussion that his work could be covered elsewhere, and (if he didn’t accept the offer) he would be made redundant. 
3. He was given only 48 hours to respond to the settlement offer, whereas the Acas Code of Practice on Settlement Agreements suggests the employee should be given 10 days.    

The Employment Appeal Tribunal dismissed each of Mr Gallagher’s three grounds of appeal. Specifically:

1. Whilst it was 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 wider circumstances of the discussion were taken into account, including that the discussion was held calmly and clearly. 
2. Although Mr Gallagher was told that his work would be covered by others going forward, this did not mean that he was automatically going to be dismissed. The business would need to explore whether there were any suitable alternative redeployment opportunities.
3. The 10-day recommendation in the Acas Code of Practice, is to the employee being given 10 days to consider the formal written terms of the settlement agreement. It is not a reference to the employee being given 10 days to consider the initial verbal settlement offer.

The Employment Appeal Tribunal held that the 48 hours Mr Gallagher was given to respond to the verbal £10,000 offer was reasonable. Therefore, the conversation with Mr Gallagher in which he was offered £10,000 remained a “protected conversation” and was inadmissible in his unfair dismissal claim. 

Comment

The two Judgments in this case indicate that there is quite a high bar in terms of what could constitute ‘improper behaviour’ or ‘undue influence’ during a “protected conversation”. This will be welcome news for employers, because it provides some reassurance that they can have these conversations without every little detail later being framed by the employee as improper behaviour or undue influence.  

Equally, confirmation that the 10-day recommendation in the Acas Code only applies to time considering the written settlement agreement, will again be welcome news for employers. Getting a quicker response from an employee on whether they are happy in principle to accept the offer will help minimise delays in the disciplinary/capability/redundancy processes.

That said, the case also serves as a reminder that employers need to be mindful that the inadmissibility principle behind “protected conversations” has limitations. It does not give employers the unfettered right to behave in an improper or underhand way. As ever, planning the conversation ahead of time is key to avoiding any disputes.     

Finally, employers should also bear in mind  the difference between a “protected conversation” and the ‘without prejudice principle.’ The two terms are often used interchangeably, but they are actually different concepts. This is explained in detail in our blog earlier this year. 

For more information, please contact a member of the Employment Team.