It is often in the interests of the parties to any dispute to settle the matter quickly and amicably. Litigation, being expensive and time consuming, is generally seen as a last resort.
A crucial element of successful settlement discussions is the ability for both parties to be open about what they will be willing to walk away for and this will often present itself as a monetary sum. It is very rare that this sum will be as high as what the court is being asked to award and so it is necessary that these discussions can be kept away from judges so as not to impact the court’s decision and to enable the parties to negotiate in earnest.
Such negotiations typically happen under the veil of “without prejudice” correspondence, which can include conversations. There is also a statutory mechanism in section 111A of the Employment Rights Act 1996 (“ERA”) which enables some conversations which do not meet the criteria to attract the usual without prejudice protection to still be shielded from the court.
Helpful guidance on the question of when without prejudice protection applies has recently been provided by the EAT in the case of Garrod v Riverstone Management Limited  EAT 177 (“Garrod“) following an appeal from the Claimant after her application for material from a without prejudice meeting to be used as part of her claim was rejected.
The Without Prejudice Rule
For a conversation or correspondence to be protected under the without prejudice rule:
- there must be an existing dispute (or it must be reasonably considered that one might arise) at the time; and
- the negotiation must be a genuine attempt to settle that dispute.
The mere existence of a complaint or grievance is not necessarily sufficient for a dispute to exist but if there are indications that litigation might start if a solution can’t be reached (for example, references to ACAS early conciliation or threats of litigation have been made) then it is likely to be accepted that the parties contemplated a dispute may exist or arise at the time.
Section 111A Employment Rights Act 1996 (“ERA”) – “Protected Conversations”
Section 111A ERA was created as the government recognised the limitations of the without prejudice rule and that employers and employees may wish to discuss terminations even where there is no existing or contemplated dispute. It is important to note, however, that s.111A “Protected Conversations” only protect against unfair dismissal claims and not against other claims, such as discrimination or whistleblowing. This section of the ERA was not considered in Garrod but it is a useful tool when it comes to settlement negotiations.
The decision in Garrod
The Claimant had raised a grievance complaining of discrimination and harassment. In the grievance, she referred to ACAS early conciliation which is a prerequisite to starting an Employment Tribunal (ET) claim. She was subsequently invited to a meeting and was asked whether she would like to have a “without prejudice conversation”. Due to her legal background, the employer assumed the Claimant understood what this meant and the Claimant did not seek clarification. During the without prejudice part of the meeting, the employer offered termination of the Claimant’s employment in return for a sum of money.
The main question before the Employment Appeal Tribunal (EAT) was whether the meeting between the parties attracted without prejudice privilege or if the protection could be “lifted” meaning what was said in it could be relied upon by the Claimant on the basis that either:
- the meeting formed part of her claim (as it did in the case of BNP Paribas v Mezzotero  IRLR 508 EAT (“Mezzotero“));
- that there was no dispute in question at the time of the meetingbecause (relying again on Mezzotero) the Claimant argued that it is well established that the mere existence of a grievance is not sufficient to constitute a dispute; or
- because the behaviour of the employer was so bad at the meeting it amounted to unambiguous impropriety and so should not be kept from the court.
The EAT found in the employer’s favour on all grounds of appeal and agreed with the ET that references in the claim and evidence to settlement proposals were protected by without prejudice privilege.
In particular, they said:
- unlike in Mezzotero, the crux of the claim in Garrod was not based on what happened at the “without prejudice” meeting – the fact that her grievance was not upheld was a matter that she could refer to even with the exclusion of the without prejudice material (this was bolstered by the fact that the meeting did not appear in her particulars of claim as an unlawful act being relied upon);
- the finding in Mezzotero does not mean that a grievance can never be sufficient to constitute a dispute; and
- the suggestion from an employer to terminate employment is not in itself a failure to act properly. In fact, it was recognised that this is commonplace in the employment sphere with Justice Bourne of the EAT saying in her judgment “There is nothing unusual about an employment dispute being settled by an agreement for termination of employment on financial terms”.
What are the key lessons for employers?
- The legal sophistication of the Claimant and their understanding of the claim process may be relevant. It is advisable to explain what “without prejudice” means when you introduce the concept and ask the Claimant if they are happy to proceed on that basis.
- The phrasing of the claim is important. If a grievance meeting, part of which is held without prejudice, is being relied upon as an act of detriment for example, then the without prejudice veil may be lifted, as in Mezzotero.
- The timing of the meeting is relevant. Is there a dispute or a reasonable prospect of one beginning if the issue is not resolved amicably? If not, and the claim is likely to be limited to unfair dismissal, consider having a s.111A Protected Conversation instead.
- The existence of a grievance does not establish whether there is or is not a relevant dispute but it is clear that a well substantiated grievance alone can count as a dispute for the purpose of the without prejudice protection.
- Behaviour from employers has to be particularly poor for without prejudice protection to be lifted. Simply suggesting that an employee’s employment may be terminated will not be sufficient but threatening to dismiss someone (as a forgone conclusion) if settlement is not reached is not advisable and would almost always waive privileged under the without prejudice rule.
- Conversations should be framed as proposals because if settlement discussions fail, employers need to avoid accusations that any open process, be that a disciplinary, grievance or redundancy, has been pre-determined and is a sham.
If you have any questions related to this article or you need assistance with engaging in settlement negotiations, please feel free to get in touch with a member of the Employment Team.