Employment Law Case Update: Settlement Agreement Negotiations and Unfair Dismissal

Settlement agreement negotiations can be long-winded and occasionally, employees can request outstanding payments are made on top of their settlement.  Our Employment Law team today reviews the case of Mr P Porchetti v Brush Electrical Machines Limited 2021 and an unfairly dismissed employee who lost out, because he was the “author of his own misfortune” due to requests during the negotiations.

Mr Porchetti began working for the company in October 2015 as a sales director. Early on in his employment it became clear he was “not particularly effective at dealing with matters promptly”.  The Employment Tribunal (ET) heard of several instances where Mr Porchetti had to be chased by his line manager, Mr Van Schaik, to perform integral parts of his role such as updating the sales management system and responding to clients. Mr Van Schaik made it known to Mr Porchetti that he was not pleased with his performance and raised performance issues several times with him over the course of his employment.

In early 2019, Mr Van Schaik met with the company’s HR Director and CEO to discuss Mr Porchetti’s performance and future at the company. They agreed that performance management would be difficult considering his senior position at the company and it was agreed that the HR Director, Mr Lordereau, would have a discussion with him about a possible settlement.

In May 2019, Mr Porchetti met with Mr Lordereau and was content with the company’s offer of six months’ pay as a settlement. He mentioned to Mr Lordereau and Mr Van Schaik that he had three years’ worth of unclaimed expenses but did not reveal the extent of them as he correctly believed it would jeopardize the settlement negotiations. The company’s expenses policy required all authorised travel expenses to be forwarded to the Finance Department within 14 days of the employee’s return. Mr Van Schaik said he would review the expenses but did not commit to paying them.

Shortly after, Mr Porchetti submitted his expense claims totalling £59,252.43, with some expenses dating back to 2015/2016. The company refused to pay more than £10,000 of these claims and the settlement negotiations broke down. At this point, the company felt that the relationship had broken down irreparably and terminated Mr Portchetti’s employment, citing capability concerns. 

Mr Prochetti then filed a claim for unfair dismissal in the ET and the company conceded that the dismissal was procedurally unfair. However, given the circumstances, the ET was satisfied that if a fair procedure had been followed, Mr Porchetti would still have been dismissed. The ET accepted that Mr Porchetti’s performance was poor and that he had failed to make any improvement despite being given various opportunities. It was Mr Porchetti’s failure to follow the proper expenses procedure which led to the breakdown in settlement negotiations. At this point, the ET reasoned, it was reasonable for the company to conclude that the relationship had irretrievably broken down and “had [the company] followed a fair procedure, a fair dismissal would have been the result”.

Similarly the ET was satisfied that had Mr Porchetti initially rejected the offer of a paid exit the company would have taken him through a capability procedure, and given Mr Prochetti’s consistent refusal to improve this would have resulted in a fair dismissal for capability. As the chances of dismissal were 100%, the ET reduced Mr Porchetti’s compensatory award by 100%.

Although the result was favourable to the employer, this case should be regarded as unique on its facts. Employers should be reminded of the importance of following a fair procedure, even when the reason for dismissal is substantially fair. Once settlement negotiations have begun, some employers may feel that termination of employment inevitable, but if settlement negotiations break down dismissing the employee without a fair process could still result in an unfair dismissal.   

If you have any questions regarding this article, you can call our Employment team today on 023 8071 7717 or email employment@warnergoodman.co.uk.

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ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.