If your employer approaches you to agree a mutual parting of ways it can be difficult to know how best to protect your position, and you need to act quickly. We set out below some points to consider:
- Often an employer will approach you on a ‘without prejudice’ basis or by way of a section 111A ‘protected conversation’. These are ‘off the record’ conversations used to explore severance terms as an alternative to going through a dismissal process. A prudent employer would have first written to you openly to commence a dismissal process; however, often this is not the case and there may be immediate things you can do on an open basis to protect you from dismissal and/or strengthen your negotiating position. The window for this can be narrow, and so if having read this blog you have any concerns, please do get in touch quickly and we can help to position you.
- The first thing to consider is the reason for wanting to part ways. What is it and do you agree with it? Ask questions so you understand your employer’s rationale, and what will happen if you do not agree to a mutual separation.
- Then, in that context, consider what legal rights you have:
- if you have more than 2 years’ continuous service then you have the right not to be unfairly dismissed. This means that in order to fairly dismiss you, your employer must have a fair reason (for example, misconduct, capability/performance, redundancy or some other substantial reason) and follow a fair process which may take some time (a redundancy processes may only take a few weeks, but a fair performance management process could take a year);
- you are protected against discrimination and whistleblowing detriment from day one of employment. If your employer’s reason for wanting to part ways is because of or related to a ‘protected characteristic’ (race age, sex, sexual orientation, pregnancy/maternity, religious belief, marital status), or is because you have asserted your rights, or because you have made a protected disclosure (whistleblowing), then any dismissal would be automatically unfair.
- Depending on the claims you have, you will want to ensure that any severance terms compensate you adequately both for your financial losses during the period of time it would have taken your employer to follow a fair process, and for your financial losses thereafter. Compensation for unfair dismissal is capped at £105,707 or a year’s salary (whichever is lower), subject to a duty on you to take reasonable steps to mitigate your losses. Compensation for discrimination/whistleblowing, whilst still for the most part being tied to your loss of income, is uncapped and you may also be entitled to an award for injury to feelings from £1,100 up £56,200.
- Severance terms should also cover your contractual entitlements including in relation to any bonus, commissions, shares, LTIPS, RSUs, carried interest etc. If early termination of your employment means you will forfeit such entitlements, then you may wish to negotiate early vesting or additional compensation for this. Any agreement should also be clear about your leaver status. These provisions can be complicated as the entity which administers the scheme rules is not usually the one negotiating the severance terms and is not usually a party to the settlement agreement. There are ways around this which we can help you with, but be aware that relying on the employer’s assurances is unlikely to afford you any enforceable legal protection.
- Consider your next move, and whether any post termination restraints in your contract will inhibit you from working freely post termination. If so, you may be able to negotiate amendments to, or the waiver of, these. The law in this area is complicated and the consequences of breaching such provisions can be costly, so if you are likely to breach your post termination restraints, and your employer is likely to enforce them against you, it would be prudent to take advice and address this as part of any mutual severance.
- As soon as you hear that your employer wants to part ways, consider these points and act quickly to position yourself. If you wait to take legal advice until you have been offered a settlement agreement, it may be too late by then to position you and/or to negotiate substantially on the commercial terms and you should not delay in taking advice in these circumstances.
If your employer wants to part ways and you would like some guidance and support to protect your position and ensure you are getting the best deal possible, please contact Emma Sangeelee, George Orman or any member of the Employment team. We are experts in this field and we are here to help.
View the other entries in our “Proving Discrimination at Work” series here.
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Please note that this blog is provided for general information only. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content of this blog.
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