Referring to Settlement Negotiations in Unfair Dismissal Claims

Employers and employees cannot refer in unfair dismissal proceedings to the fact that settlement negotiations have taken place.

Speedread

The rule which precludes parties to employment tribunal proceedings from referring to pre-termination settlement negotiations extends not just to the content of the negotiations, but also to the fact that those negotiations have taken place. Parties cannot waive this rule.

Background

Employers and employees will often seek to terminate employment on agreed terms. The common law rule on privilege, the “without prejudice rule”, only applies where there is already a dispute between the parties when the discussions take place. S111A Employment Rights Act 1996 was introduced in July 2013 so that parties could seek to agree terms of departure without the need for a pre-existing dispute. If terms are not agreed and the employee issues an employment tribunal claim, S111A excludes from evidence “any offer made or discussions held” with a view to terminating employment on agreed terms. There is an exception where there has been improper behaviour.

S111A only applies to unfair dismissal claims. It does not apply to any other claims, such as discrimination, or to claims of automatic unfair dismissal.

Facts

Ms Bailey worked as an office secretary on a part-time basis until her resignation. She alleged that her employer had made it clear that part-time working was no longer an option. Prior to her resignation she initiated discussions about a settlement agreement. She and her employer exchanged “without prejudice” correspondence discussing settlement terms. She subsequently referred to the content of the without prejudice correspondence in an open letter raising a grievance and made it clear that she was openly relying on the previous without prejudice correspondence. Her employer did not take issue with her on this. It did not uphold her grievance and it also referred to the without prejudice correspondence in its own grievance report.

Ms Bailey claimed unfair dismissal and indirect sex discrimination. On her tribunal claim form, she referred to the fact that she had initiated settlement discussions, to the without prejudice correspondence and to various internal communications about settlement which had been disclosed to her via a subject access request. The employer did not object to these references and in its tribunal response it cited the same material in support of its own case. However, the question of admissibility was raised at a preliminary hearing.

The employment tribunal considered that S111A only covers the details of any settlement offer made or discussions held, and not the simple fact that discussions had taken place. It ruled that evidence of the pre-termination negotiations was admissible, subject to redaction of specific references to any offer made.

The employer appealed and Ms Bailey cross-appealed.

The EAT ruled that the tribunal had been wrong to find that S111A applies only to the content of any offers made or discussions held. It considered that the mere fact that there have been such offers or discussions is also inadmissible. A claimant cannot therefore rely on the existence of such negotiations in support of an unfair dismissal claim.

The EAT ruled that S111A renders inadmissible not simply the settlement discussions between employer and employee, but also discussions within the employer, such as between different managers or between a manager and HR. The EAT noted that it is common for discussions to be reported back to higher management or HR and it would run counter to the purpose of S111A if evidence of those reports were admissible.

The EAT also ruled that S111A privilege cannot be waived. Parties cannot agree to the admission of evidence otherwise rendered inadmissible by S111A.

The evidence was not therefore admissible in the unfair dismissal claim, subject to any argument over whether the “improper behaviour” exception in S111A(4) applied. In this respect the EAT considered that the exception is wider than the “unambiguous impropriety” exception to the without prejudice rule. It referred that issue back to the employment tribunal.

Implications

The scope of S111A privilege is wide. Unlike without prejudice privilege, it covers not just the content of settlement discussions but also the fact that an offer has been made or that settlement discussion have taken place. It also extended to internal discussions within the employer.

Unlike without prejudice privilege, S111A privilege cannot be waived. However, the exception for improper behaviour is also wider than the “unambiguous impropriety” exception to the without prejudice rule, meaning that parties may lose S111A privilege more easily than without prejudice privilege.

This was a case in which the employee also claimed discrimination, where S111A privilege does not apply. If communications are not also privileged under the without prejudice rule (which does apply in discrimination cases), a tribunal will have to consider evidence in relation to the discrimination claim, which it will then have to disregard in relation to the unfair dismissal claim. This may pose some practical difficulties for tribunals.

The EAT also decided that the parties had waived without prejudice privilege for the purposes of the discrimination claim. Ms Bailey had referred to the material in her claim form and her employer had not objected and had itself referred to the same material in its response form. This was sufficient to demonstrate that the parties had clearly agreed that any privilege should be waived. However, the reference to the material in the grievance and grievance report was not sufficient to waive without prejudice privilege.