It is a type of dismissal, and the statutory definition encompasses three types of situations: business closure, workplace closure, and reduction of workforce. Redundancy is a potentially fair reason for dismissal and therefore may give an employer a defence to an unfair dismissal claim.
A redundancy must be genuine. Employees selected for redundancy due to any of the protected characteristics in the Equalities Act 2010, or on grounds of fixed-term or part-time status, have the right to bring a claim for discrimination or for less favourable treatment due to their fixed-term or part-time status.
This is an agreement between an employer and employee that sets out the terms of the employee’s termination of employment. It usually includes a waiver of the employee’s statutory and contractual claims on termination in return for some sort of (usually) monetary incentive. The agreement is legally binding and if a party is in breach, the persecuted party is free to bring a claim.
If an employee has a claim against their employer which could be brought in an employment tribunal, a settlement agreement may be used to stop the employee from making the claim or taking it any further.
A protected conversation – sometimes referred to as pre-termination negotiation – is a conversation to discuss termination of employment and set out proposed terms of a settlement agreement.
‘Without prejudice’ can be used as a heading or label or within the body of any letter, email or other document which forms part of an exchange of correspondence. It will prevent statements made in a genuine attempt to settle an existing or potential dispute from being used as evidence or admissions in court or tribunal proceedings against the party who made them. Parties are more likely to enter into settlement discussions if they can speak openly and without restriction.
It is common to see the words ‘without prejudice’ being used with the phrase ‘subject to contract’, which also confirms that nothing said during the negotiation process will give rise to a legally binding contract. All the terms must be agreed and signed by both parties first.
Settlement agreements are sometimes offered in the context of a redundancy.
However, settlement agreements are voluntary. The employee does not have to sign the agreement and has room for negotiating the terms. Settlement agreements can also include larger sums of money than what the employee is entitled to in terms of a statutory redundancy payment, which make them more attractive to employees.
Settlement agreements may also be offered in circumstances other than redundancy, such as when an employer wants to dismiss the employee due to gross misconduct but does not want to deal with a potential claim for unfair dismissal.
An employer may offer a settlement agreement package that is more attractive to an employee than the redundancy package they are entitled to. If this is agreed, the employer can avoid the lengthy process of consultation, avoid future claims brought against them by the employee, and the terms are kept confidential from other employees.
If an employee rejects the settlement offer, the employer may still go through the redundancy procedure and the employee may take advice on whether it has been done fairly or whether they have any claims against the employer for unfair dismissal. This is why an employee will consider whether the amount being offered in the settlement agreement is adequate, because if they have any potential claims, they may be able to receive an amount of compensation greater than the settlement sums being offered.
If an employee suspects that this is not a genuine redundancy, they could let the employer know that they will be claiming unfair dismissal if the settlement payment is not increased. If the redundancy is genuine, however, the employee could simply ask the employer to be more generous. Some employees prefer to negotiate themselves, by trying to convince the employer to budge on certain aspects of the agreement, for example, increasing an ex-gratia payment.
The employee can alternatively negotiate through their solicitor, particularly where there are complex legal arguments to put forward. Obtaining independent legal advice is a requirement of a settlement agreement because the employee will be waiving their rights to bring or continue any claims against their employer. A solicitor would be advising the employee on the strengths of a potential case they may bring and explain on that basis which terms in the agreement are more easily negotiable. The solicitor would also advise on which terms are standard and may be difficult to convince the employer to change.