When can negotiations with an employee be used as evidence?
Employers now have two ways in which they can have frank discussions with employees to try to settle disputes, either before they arise or after they have arisen. In this recent case the admissibility of evidence from settlement negotiations was discussed, and provides some useful reassurance for employers.
In July 2013 ‘protected conversations’ were introduced by section 111A of the Employment Rights Act which states;
(1) Evidence of pre-termination negotiations is inadmissible in any proceedings on a complaint under section 111 (unfair dismissal). This is subject to subsections (3) to (5).
(2) In subsection (1) “pre-termination negotiations” means any offer made or discussions held, before the termination of the employment in question, with a view to it being terminated on terms agreed between the employer and the employee.
(3) Subsection (1) does not apply where, according to the complainant’s case, the circumstances are such that a provision (whenever made) contained in, or made under, this or any other Act requires the complainant to be regarded for the purposes of this Part as unfairly dismissed.
(4) In relation to anything said or done which in the tribunal’s opinion was improper, or was connected with improper behaviour, subsection (1) applies only to the extent that the tribunal considers just.
(5) Subsection (1) does not affect the admissibility, on any question as to costs or expenses, of evidence relating to an offer made on the basis that the right to refer to it on any such question is reserved.
The result of this new legislation was to give employers the option of having frank discussions with employees prior to any dispute arising and prior to the termination of their employment. There has however been some uncertainty about the extent to which protection applies particularly where other claims, such as discrimination, arise, which are not covered by section 111A.
Prior to the introduction of ‘protected conversations’ employers could rely on the common law ‘without prejudice’ rule. This meant that where there was a genuine dispute between the parties any details of settlement discussions and negotiations could not be used as evidence later on.
The ‘without prejudice’ rule does not apply to the admissibility of evidence that the discussions took place, and only applies where the discussions are about settlement and not merely each party setting out their position.
Mrs Bailey was employed by Faithorn Farrell Timms LLP, a firm of surveyors, as an office secretary from March 2009 until 26th February 2015. Mrs Bailey had been employed on a part-time basis, however at the end of 2014 an issue arose about her part-time status and Mrs Bailey alleged that the employer told her that working part-time was no longer an option.
Mrs Bailey instigated settlement discussions with her employer following this and correspondence was sent between Mrs Bailey’s Solicitors and the Employer. Mrs Bailey’s Solicitors headed the correspondence as ‘Without Prejudice & Subject to Contract’.
No agreement could be reached and Mrs Bailey raised a grievance referencing the allegations made in her solicitor’s letters.
Mrs Bailey subsequently resigned and made a claim in the Employment Tribunal for constructive unfair dismissal and sex discrimination. In her claim Mrs Bailey made reference to the settlement discussions.
During the preparations for the final hearing the employer raised an issue about the fact that the settlement negotiations should not be admissible as evidence as they were marked ‘without prejudice’.
The Employment Tribunal concluded that the correspondence was admissible and that it was not covered by the protection of Section 111A or the common law prejudice principle.
Both parties appealed.
The Employment Appeal Tribunal analysed the principles of the ‘without prejudice’ rule and stated that ‘the principle provides that where there is a dispute between parties, any written or oral communications between them amounting to a genuine effort to resolve the dispute will not generally be admitted in evidence at a subsequent hearing of the claim. This enables parties to negotiate frankly without the risk that anything said in negotiations will be used against them in subsequent legal proceedings. Without prejudice privilege is, however, not invoked merely by the parties’ description of negotiations as such: if there is no extant dispute, or no genuine efforts at resolving the dispute, the rule will not apply, regardless of the label used. Conversely, absence of the label “without prejudice” will not be fatal if the negotiations meet these criteria: the principle is one of substance, not form’.
Whilst the ‘without prejudice’ privilege can be waived it requires the agreement of both parties in the negotiation, and it may be that the parties waive the right to privilege by their actions rather than expressly.
The Appeal Tribunal then went on to consider the effects of section 111A of the Employment Rights Act. The effect of this provision is to remove the need for there to be a genuine dispute between the parties when it comes to claims for unfair dismissal.
In this case the discussions that took place were also regarding claims for sex discrimination, however the fact that Mrs Bailey had other claims in addition to unfair dismissal did not mean that the discussions would be admissible as evidence.
The Appeal Tribunal concluded that Section 111A extends further than the common law ‘without prejudice’ protection so that the fact of negotiations pre-termination, as well as content of negotiations, cannot be disclosed to the Employment Tribunal, and privilege cannot be waived.
In addition to this clarification, the Appeal Tribunal confirmed that section 111A also extends to internal discussions within an employer’s organisation, such as those between managers and HR. These discussions are therefore covered by the rules under 111A and do not have to be disclosed as evidence in the proceedings.
Where there is more than one type of claim the section 111A discussions can be used and will be admissible as evidence for the purposes of the other claims but are not admissible for unfair dismissal.
Finally, the Appeal Tribunal concluded that the common law ‘without prejudice’ rules applied to the case as there was an existing dispute as early as January 2015.
Points to note
‘Protected Conversations’ and ‘Without Prejudice’ discussions are a useful tool for 1) trying to avoid dispute and 2) trying to prevent a lengthy dispute once it arises. This case however demonstrates the need to proceed with caution with such ‘without prejudice’ correspondence and not merely head your letter as ‘without prejudice’ to avoid disclosure as evidence later on.
Whilst the Appeal Tribunal gave some useful guidance in this case on the admissibility and disclosure of internal conversations, you should take care to, where possible, avoid having lengthy correspondence or conversations internally about such issues as you may find they become evidence later on.
Action to take
1) If you are considering having a ‘protected conversation’ to approach an employee about leaving your employment seek some advice in advance;
2) If you are already in dispute with an employee and you want to make a settlement offer, I recommend that you obtain legal advice in advance;
3) If you would like to discuss any of these points please do not hesitate to contact me 01983 897003 or 023 8098 2006.
Faithorn Farrell Timms LLP v Mrs S Bailey – Employment Appeal Tribunal