Section 111A of the Employment Rights Act 1996 was introduced with the aim of giving employees and employers the opportunity to engage in pre-termination discussions without risk of those discussions being used in evidence in a subsequent unfair dismissal claim. The legislation applies to ordinary unfair dismissal hearings unless there has been "improper behaviour". The case of Lenlyn UK Limited v Kular highlights examples of what can amount to improper behaviour.
Mr Kular was employed by the Respondent as a Financial Controller. He resigned in December 2014, having been given a choice to accept an offer of money to end his employment or to face disciplinary proceedings. In March 2014, the Respondent had engaged a contractor, Coin Co, to collect cash and bank it. As a result of a fraud by Coin Co the Respondent was £1.9 million out of pocket before anyone noticed what was going on. The Respondent was not able to recover the money, because Coin Co went into administration. An investigation by an external forensic accountant suggested that Mr Kular's conduct, while not dishonest, could be considered to be negligent and recommended disciplinary proceedings be considered.
The Respondent's Chief Financial Officer discussed the matter with Miss Pratt, the HR Manager, and it was decided to make a financial offer - by way of a protected conversation - to Mr Kular rather than start disciplinary proceedings. On 16 December Mr Kular was invited to a meeting, told that the investigation was finished, that the forensic accountant’s view was that he had been "grossly negligent" about Coin Co and that the Respondent was considering taking disciplinary action against him. He was reassured that no decision had been made as to the potential outcome of disciplinary proceedings, but the Respondent wanted to make him a “without prejudice” offer to leave. Mr Kular was given an envelope. He was told that there was a letter in it and a settlement agreement with an offer of £18,000. Mr Kular said it was not enough. Miss Pratt said that she was going on holiday, she wanted Mr Kular to think about it, and he was to let her know by Monday (22 December) if he was interested in taking it. He was not required to come to work while he considered what to do. It was agreed that the Mr Kular’s colleagues would be told he was taking time off for personal reasons.
On returning home after the meeting Mr Kular attempted to put an out of office reply on his email but found he had been cut off from his employer's IT system. Mr Kular responded to the Respondent on 22 December by resigning and raising a grievance. This included a statement that the offer was not a protected conversation and the reasons why Mr Kular thought that to be the case.
The Claimant raised both an ordinary unfair dismissal claim and a whistleblowing claim. The Tribunal rejected the latter but upheld the former. It also considered whether the offer had been a protected conversation and concluded it had not. The details of the 16 December meeting were admissible because the impropriety exception applied. Mr Kular had not been given reasonable time to consider the settlement offer and, in addition, the accountant's report had been misrepresented to the claimant. The report said that there needed to be an investigation, not that the claimant had been "grossly negligent".
The EAT dismissed the Respondent's appeal, finding that the Employment Tribunal had been entitled to conclude that the employer's conduct in pre-judging the case on 16 December was a breach of trust and confidence that entitled Mr Kular to resign, and that the misrepresentation of the accountant's report was a further breach. Both these issues fall squarely within the ACAS Code of Practice on settlement agreements as examples of improper behaviour.