Settlement Agreement Advice

Hello and welcome back to Case of the Week. Last week we had a bumper newsletter which included articles on bank holiday working, Sports Direct, Byron Burger and race discrimination. This week we will be looking at protected conversations. This case is a must read for those who wish pre-terminations discussions to remain confidential and legally privileged.

A protected conversation is a pre-termination discussion. These used to be legally privileged under common law by using the term ‘without prejudice’ in the correspondence. However, for this legal privilege to be engaged the two parties need to be in dispute. To combat this, in 2013, the Government added s.111A to the Employment Rights Act 1996. This allowed protected conversations when the parties were not in dispute. However this only applies to ordinary unfair dismissal claims and to no other type of claim.

In light of that, today’s question is:

How does s.111A of the ERA interact with the ‘without prejudice’ common law principle?

Ms Bailey, the Claimant, was an office secretary at Faithorn Farrell Timms LLP, the Respondent, a surveyors firm. The Claimant was informed that she would no longer be able to work for the Respondent on a part time basis and initiated severance discussions with a letter marked ’without prejudice’. The Respondent replied but did not use the ‘without prejudice’ term.

The letters did not really focus on negotiating a settlement and the Claimant raised an internal grievance. In her grievance letter she referred to the Respondent’s previous letters. The grievance was not upheld and the Claimant resigned and bought claims unfair constructive dismissal and sex discrimination.

There were references to settlement discussions in both the Claimant’s ET1 and the Respondent’s ET3. At a later stage the Respondent alleged the majority of the evidence was inadmissible due to the ‘without prejudice’ rule. The ET held that the majority of the evidence was admissible. It held that s.111A only applied to specific references of offers made and not general discussions about offers.

The Respondent appealed and the EAT held that s.111A could be applied more broadly to any mention of an offer. It added that this could extend to the Respondent’s internal discussions between management and HR. Furthermore the EAT found that under the common law rule both parties could agree to waive their right to legal privilege either in writing or via conduct. However, this right could not be waived under s.111A.

The takeaway points:

The ‘without prejudice rule’ and s.111A have a complex relationship. Firstly s.111A only protects ordinary unfair dismissal claims. Therefore, the ‘without prejudice’ rule is needed when protected conversations discuss any other claim. It also highlights the importance of only discussing settlements in protected conversations and leaving any other issues for open correspondence, including grievances.

To avoid waiving their rights employers should make sure:

– All settlement correspondence is marked without prejudice.

– Any without prejudice protected conversation is not discussed in open correspondence.

– That if an employee refers to without prejudice correspondence then the employer should object straight away as failure to do so could be a waiver through conduct.

To read more click here.