Can we offer an under-performer a compensation package instead of going through time-consuming legal procedures?
The obvious risk is that the employee will not accept the offer. Undoubtedly, they will then argue that any subsequent disciplinary or performance review process is a sham, and that they were unfairly dismissed as a result. Or they may allege that you have destroyed the relationship of mutual trust and confidence, and claim constructive unfair dismissal.
To minimise risk, employers often say that this type of discussion is being held ‘without prejudice’. However, a simple statement to that effect will not necessarily provide protection of the ‘without prejudice’ doctrine, which dictates that such settlement communications are inadmissible in court or tribunal proceedings. For this to apply, there must be a genuine dispute between parties at the time, which they are endeavouring to settle. If there is not, the conversation will be referred to in subsequent proceedings.
Consequently, you should ensure that ‘without prejudice’ discussions are only conducted once a dispute has arisen, and are not used to create the dispute. The most prudent approach is to instigate a disciplinary or performance review procedure before having any such discussion. At the end of the initial stage, suggest that the overall outcome may well not be favourable to the employee and propose a without prejudice conversation to discuss ways this can be avoided. If the negotiations fail, you can fall back on the formal procedures, although this is not without risk of allegations that the process is a sham, or potential claims of constructive dismissal. You should always apply the principle that anything said during ‘without prejudice’ negotiations is at risk of being relied on in a tribunal.
If the employee accepts the offer and signs a compromise agreement, you will have avoided the need to comply with the statutory dismissal procedure. You will also have the reassurance of knowing that they have signed away their right to instigate proceedings against you.