A settlement agreement is a legally binding agreement between the employer and employee that can resolve potential workplace disputes.
There are often circumstances where, in the face of a potential dispute, parties can mutually agree settlement terms which will result in an employee waiving their employment rights, in consideration for a financial payment. Until the agreement is signed, all discussions and offers, can remain off the record and parties cannot be held accountable for any provisional offers or concessions that have been made. These discussions are often referred to as without prejudice.
There are however, risks of without prejudice discussions being unprotected, if the purpose of these discussions, are abused or used as a veil to pressure an employee to accept terms. In these circumstances, the without prejudice protection is removed leaving an employer exposed to allegations of unfair dismissal.
An employer's conduct during settlement discussions could be deemed improper if it is used as tactic to pressure an employee into accepting the terms offered. If the employee is warned they would be sacked if they did not agree to the employer's offer, the employee could argue that any dismissal was therefore pre-determined, exposing an employer to an unfair dismissal claim.