If you’ve been in a room with us recently you will have heard us talking about the changes to unfair dismissal rights; which affect businesses as of the 1st January 2027, and what employers can do now to mitigate the risks. As part of those conversations some businesses have been discussing whether the route of settlement agreements may become more prevalent as a route of terminating employment once an employee has accrued employment rights.

Whilst settlement agreements are an option for employers, it isn’t always as straightforward as some businesses may think with a recent case Tarbuc v Martello Piling Ltd highlighting some of the pitfalls that can happen when entering these types of conversations.

Before we get into the case it’s important to clarify some terminology and why it’s important.

Protected Conversations vs Without Prejudice Discussions: What’s the Difference?

One of the key lessons from Tarbuc v Martello Piling Ltd is that employers should understand the important distinction between a protected conversation under section 111A of the Employment Rights Act 1996 and a without prejudice discussion.

Although both are commonly used when discussing an employee’s potential exit from the business, they operate in very different ways.

A protected conversation allows an employer to have an “off the record” discussion about ending employment, even where no dispute currently exists. This can make them particularly useful where an employer wishes to explore a mutually agreed exit before formal processes begin.

However, the protection is limited:

• It only applies to ordinary unfair dismissal claims.
• It does not apply to claims such as discrimination, whistleblowing, breach of contract, unlawful deductions from wages or detriment claims.
• Protection can be lost where there is evidence of improper behaviour.

Without prejudice protection is generally wider but comes with an important condition: there must already be an existing dispute between the parties. Where that requirement is met, communications aimed at resolving the dispute are typically inadmissible in a much broader range of employment claims, not just unfair dismissal claims.

However, simply labelling a conversation or letter “without prejudice” does not automatically create protection. If there is no genuine dispute in existence, the protection may not apply.

Why Does This Matter?

The Tarbuc case demonstrates why employers should think carefully before relying solely on section 111A protection or a ‘protected conversation’. While the employer sought to exclude evidence of the settlement discussion, the employee had also brought claims for unlawful deduction from wages and part-time worker discrimination. As a result, much of the evidence relating to the discussion remained potentially admissible regardless of whether the unfair dismissal claim was protected.

In practice, where a dispute already exists, employers may find that without prejudice protection offers greater certainty and broader evidential protection. Where there is no dispute, a protected conversation may still be appropriate, but it should be carefully planned and conducted with an awareness of its limitations.

The key takeaway for employers is simple: before initiating any exit discussion, consider not only what is being said, but also which legal protection applies and whether it will provide the level of protection you expect.

Employers often rely on “protected conversations” when exploring an agreed exit with an employee. However, the recent Employment Appeal Tribunal (EAT) decision in Tarbuc v Martello Piling Ltd serves as an important reminder that these conversations do not provide blanket protection and that the way an exit discussion is conducted can have significant legal implications.

Practical Lessons for Employers

This case provides several valuable lessons for organisations considering settlement discussions or exit negotiations.

1. Do Not Assume Section 111A Provides Complete Protection

One of the most important takeaways is that section 111A protection is far narrower than many employers assume. Even if discussions remain protected for the purposes of an unfair dismissal claim, they may still be fully admissible in relation to other claims. Before initiating settlement discussions, employers should consider the potential range of claims an employee could bring and assess whether section 111A offers meaningful protection in the circumstances.

2. Carefully Plan Exit Conversations

Although the EAT did not determine that the meeting was improper, it made clear that the circumstances surrounding a discussion are relevant. Best practice would be to:

• Provide reasonable notice of the meeting.
• Clearly explain its purpose where appropriate.
• Consider whether allowing a companion would assist in demonstrating fairness and transparency.
• Avoid creating any perception of undue pressure.

These steps can help reduce allegations that an employee was ambushed or coerced.

3. Be Mindful of Acas Guidance

While Acas guidance is not legally binding, tribunals frequently take it into account. Where a formal settlement agreement is proposed, employers should generally allow employees adequate time to consider the offer and obtain independent legal advice. Rushing the process can increase the risk of challenges later.

4. Consider Whether Without Prejudice Protection Is Available

The EAT’s comments also highlight the potential advantages of conducting discussions on a without prejudice basis where a dispute already exists. Without prejudice protection can apply to a wider range of claims than section 111A and may avoid some of the evidential complications that arose in this case. However, employers should always seek advice before relying on without prejudice protection, as strict legal requirements must be satisfied.

5. Focus on Process as Well as Content

Many employers concentrate on ensuring that the wording used during a protected conversation is appropriate. This case demonstrates that tribunals may scrutinise the entire process, including:

• How the meeting was arranged.
• Whether sufficient notice was given.
• The opportunity for support or representation.
• The level of pressure applied.
• The time allowed for consideration of proposals.

A well-managed process can be just as important as the content of the conversation itself.

Final Thoughts

Tarbuc v Martello Piling Ltd is a timely reminder that protected conversations are not risk-free and should not be treated as a shortcut to employee exits.

While section 111A remains a useful tool, employers should understand its limitations and recognise that conversations may still become evidence in other employment claims. The case also reinforces the importance of handling settlement discussions carefully, respectfully and transparently.

From a HR perspective, the safest approach is to plan exit discussions thoroughly, document the rationale for decisions, follow Acas guidance where appropriate and seek professional advice before commencing negotiations. Doing so will help minimise legal risk while maintaining fairness and professionalism throughout the process.

If you are considering starting a conversation with an employee on the above basis, please get in touch to discuss further at hello@empowr.uk