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Pre-termination negotiations and protected conversations

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Pre-termination negotiations and protected conversations

Pre-termination negotiations and protected conversations

The Without Prejudice Rule

The without prejudice rule is a common law rule which should be used in genuine attempts to settle a dispute. This rule will only apply where there is an existing dispute between the parties.

Protected Conversations

The Enterprise and Regulatory Reform Act 2013 introduced the concept of “protected conversations” which allow an employer and an employee to have a confidential discussion regarding the ending of the contract between the parties, even if there is no previous dispute. The discussions will be inadmissible as evidence in any subsequent proceedings for unfair dismissal.

Section 111A of the Act defines pre-termination negotiations as "...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".

Faithorn Farrell Timms LLP v Bailey UKEAT/0025/16

This case considered the extent to which both the without prejudice rule and s.111A protected conversations applied where both the employer and the employee had made reference to the settlement negotiations and correspondence when the matter escalated to the Employment Tribunal.

The Facts

Mrs Bailey worked part-time as an office secretary for Faithorn Farrell Timms LLP (FFT LLP). Towards the end of 2014, FFT LLP had made it clear that she would not be able to work part time any longer and Mrs Bailey initiated a settlement discussion. By early 2015, the parties were in dispute and Mrs Bailey’s representatives wrote a “without prejudice subject to costs” letter to FFT LLP, reiterating the settlement offer Mrs Bailey had set out in the previous discussions. FFT LLP replied by a letter which was not marked without prejudice.

In May 2015, Mrs Bailey issued tribunal proceedings, claiming unfair dismissal and sex discrimination. In her claim, she referred to initiating the settlement discussions in December 2014, the without prejudice correspondence between her and FFT LLP and various of FFT LLP's internal communications, that had been disclosed to her via a subject access request.
In its response, FFT LLP denied Mrs Bailey's claims but did not object to her open references to the correspondence marked without prejudice.

A preliminary hearing took place in October 2015 where the issue of admissibility was raised and the tribunal asked for written submissions on the issue. The tribunal concluded that the documents in issue were neither rendered wholly inadmissible by section 111A of the ERA 1996, nor by the common law without prejudice principle. It noted that section 111A only applies to unfair dismissal claims and there was another claim in this case. FFT LLP appealed and Mrs Bailey cross appealed.

The Decision

HHJ Eady QC, sitting alone in the Employment Appeal Tribunal (EAT), upheld in part both the appeal and the cross appeal. The EAT held that section 111A covers not just the offers made, but the fact that pre-termination discussions have taken place, as it states that "evidence of pre-termination negotiations is inadmissible" and defines pre-termination negotiations to mean "any offer made or discussions held". Therefore, the wording used rendered inadmissible evidence of any offer made or discussions held with a view to terminating the employment on agreed terms and this must extend to the fact of the discussions, not just their content. The EAT stated that otherwise a claimant could refer to the existence of pre-termination negotiations in support of their claim that they had been unfairly dismissed.

The EAT held that without prejudice privilege applied in this case as it was common ground that the parties were in dispute by January 2015. For the period before that, the EAT proceeded on the assumption that there was no dispute, so issues of admissibility before that date could only be considered under section 111A, not under the without prejudice privilege rule.

Can without prejudice privilege be waived?

The EAT held that while without prejudice privilege can be waived, it requires the agreement of both sides to the negotiations and should be unequivocal: a genuine error in disclosure will not automatically suffice, although it may, in certain circumstances, be implied from the parties' conduct.

Can privilege under section 111A be waived?

The EAT held that privilege cannot be waived under section 111A as the wording of the section did not extend to permit agreement to the admission of evidence that would otherwise be inadmissible under the section.

Conclusion

The judgement is the first decision to be released by an appeal court as to the scope of section 111A and its interaction with the common law without prejudice rule. The case makes it clear that a tribunal can consider evidence in relation to, a discrimination claim or a whistleblowing claim, but then disregard it in relation to an unfair dismissal claim arising from the same facts.

The tribunal will then have to ensure that they are not swayed by the evidence they have then heard when making a decision in relation to the unfair dismissal claim.

For more information, please contact our employment team on 0345 070 6000.