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Gallagher v McKinnon’s clarifies when severance talks are “off the record” and what can amount to undue influence.
30 January 2025
Case Study
In a recent webinar on Protected Conversations and ending employment by agreement, one issue we highlighted was how to handle the conversation and avoid any inference of constructive dismissal and/or undue influence. This is an issue that has recently been considered by the Employment Appeal Tribunal (“EAT”) in the case of Gallagher v McKinnon’s Auto and Tyres Ltd.
A “Protected Conversation” allows an employer the opportunity to enter into an “off the record” conversation about terminating employment on agreed terms. This is often a valuable tool in the organisation’s armoury and can be used in numerous situations including when dealing with disputes, potential redundancy, alleged misconduct and concerns over capability.
The rule set down in section 111 of the Employment Rights Act 1996 allows these conversations to remain inadmissible in any subsequent Employment Tribunal proceedings- provided that they are conducted properly. If the conduct of either party is “improper” then the conversation will become admissible as evidence.
So, what amounts to improper conduct? Previous cases tell us that threats to end employment if the deal is not accepted; giving insufficient time to consider the offer and placing undue pressure on the employee are all things which render the conversation admissible (and therefore the “off the record” rule does not apply). It is worth remembering that the ACAS code of practice on settlement agreements also sets out good practices to follow- including allowing the employee to be accompanied and allow 10 working days to obtain legal advice.
In this case before the EAT, Mr Gallagher had been absent from work due to illness and his employers decided that they no longer required his role as they had been able to cover it adequately. He was invited to a meeting that he had believed to be about his health and his return to work. However, his employers instead used the meeting to offer him a settlement agreement as an alternative to redundancy. He was told that he had 48 hours to accept an enhanced redundancy package and that failure to accept within this time would lead to the offer being withdrawn and a redundancy process would commence. If he accepted the offer, he would be sent a settlement agreement.
Mr Gallagher was upset about this and did not accept, claiming that the manner of communication had been forceful and aggressive. He was subsequently made redundant and pursued a claim for unfair dismissal. In doing so, he tried to have the conversation admitted as evidence and McKinnon’s Auto and Tyres Limited argued that the conversation had been off the record and could not be used as it was protected by s. 111 ERA 1996.
Case Study
The Employment Tribunal found that the conversation was not admissible for a number of reasons.
First, it found that there was no improper behaviour, and no aggression had been shown. Further, it was not fatal that Mr Gallagher had thought the meeting was about his health but was in fact about something else. There was no written agreement provided at the meeting and so it was still an offer to be considered as an option (not a foregone conclusion). He had not been told that he would be dismissed if he rejected the option; but that a redundancy process would commence. The details of the meeting were therefore within the s111 protection and the content not admissible.
Mr Gallagher appealed to the EAT who, sensibly, upheld the ET’s decision. The fact that the meeting was not about what Mr Gallagher had thought- and that he had not been forewarned- did not amount to improper behaviour. The 48-hour window in which to accept the verbal offer was not unreasonable (it was not that he had 48 hours to accept and sign any written agreement, but to consider the option and acknowledge his interest). Again, the s111 rule applied and the conversation was not admissible.
Whilst we must remember that every case is fact-specific, there is quite a lot of useful information to take from this case.
The fact that an employee thought the meeting was about something else was not fatal- but it is always preferable to have clear communication. Even if you do not forewarn staff about the content of the meeting, it would be desirable to clarify the nature of the meeting during the discussion. An employee who feels ambushed is unlikely to respond well to the option of the offer being made; whereas an employee who understands what is being offered (and what the alternatives are) is more likely to come to a considered decision.
Whilst both the ET and the EAT did not hold the 48-hour window to be improper, we would suggest that this is a short timeframe. Furthermore, the ET and EAT did distinguish that it was only an option to be considered- and not a written agreement to be concluded. Had it been the latter, the ACAS code of practice would have required 10 days to take legal advice as good practice.
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