You’re fired!

Usually, employers wishing to dismiss an employee will endeavour to follow a fair process. With senior staff however, such processes can be particularly difficult. One alternative is to dispense with standard procedure, strike a deal whereby the employee leaves, receives compensation, and settles all claims. This is not easy or cheap, but if your senior staff member is failing to meet an appropriate standard, it’s one option worth considering.

Abrupt dismissals can result in claims for unfair and wrongful dismissal. Further, claims for discrimination and whistleblowing are often thrown in to up the ante. Such claims are particularly unwelcome, not least because of the cost. Damages for unfair dismissal can reach £76,700; if discrimination or whistleblowing is established by the sacked staff member, then the potential exposure is unlimited. Notice must also be paid. It is against this potential liability that the employer’s dismissal package must be judged: the key is to have in place a budget which is sufficiently tempting to the soon-to-be-ex-employee, whilst at the same time bearable for your organisation. But once a budget has been set, how does one start, negotiate and conclude the parting?

THE OPTIONS
There are two options: ‘nuclear’ or ‘carrot and stick’. The nuclear option does not start amicably but (usually) ends that way. It starts with an immediate dismissal (which would be unfair) after which negotiation follows to settle the claim. Once started, there is no turning back, so careful consideration needs to be given to the value of claims which could arise.
The ‘carrot and stick’ option is used where disciplinary, capability or loss of confidence issues need addressing. The formal process is started and then an offer made. If the deal cannot be reached the process would need to be completed or the nuclear option activated. A major problem with such an approach is that the employee will gain a huge advantage in any future litigation if they can refer to the failed negotiations. The only way to prevent that, is to negotiate on a Without Prejudice basis, meaning that the discussions cannot later be relied upon in tribunal. Unfortunately, labelling a discussion Without Prejudice will not be sufficient. A ‘dispute’ and a ‘genuine attempt to settle it’ is also necessary.
When the ‘nuclear’ option is used, the subsequent settlement negotiations will be protected by the Without Prejudice rule. Neither party will therefore be able to rely upon them in tribunal. This is because there will be a dispute and the parties will be trying to settle it. However, if the ‘carrot and stick’ option is used it is questionable when the Without Prejudice rule will kick in, because at the outset there is probably not a dispute. There is also a risk that by offering a deal the employee will resign and claim constructive dismissal.
Unfortunately, there is no way around this and it is necessary to hold the conversation with a view to reducing the risk of such arguments being successful. To that end, avoid words which could amount to a vote of no confidence. For example, it would be dangerous to say: “You have two choices. Either accept the deal or we will take formal action.” Instead say: “There are issues and we would like to work through them. However, if you didn’t want to go through that process there is an alternative …” Also, ensure there is a reasonable cause for concern. Hold the investigation first, therefore, and then later introduce the alternative as a way out.

DO THE MATHS
Negotiations should be concluded quickly. The attractiveness of immediate cash in hand and the avoiding of a drawn-out dispute should be stressed, as should the duty to find another job. Also, talk in terms of compensating for net pay – since that is what the tribunal will award. Three months tax free works out nearer to five months net.
Once a figure has been agreed, a Compromise Agreement is needed to record the agreement. Such an Agreement will also deal with references, announcements, confidentiality and non-derogatory comments. The Employee will have to have independent legal advice, but by the time the terms of the Compromise Agreement are being discussed, the employee will likely have appointed a solicitor.
Finally, if your organisation does not have the budget to deal with problems in this way, a conventional process will be needed. In short, this involves explaining to the employee the problem and giving them the chance to remedy it. Help and training may be needed, but if the employee fails you can eventually move to termination. How many warnings will be necessary is a key question and ACAS considers that it can be appropriate to have just one; where the misconduct or unsatisfactory performance has a serious or harmful impact on the organisation. Clearly, the actions of a senior member of staff are likely to be more serious or harmful.