Proper pressure: the without prejudice rule, pre-termination negotiations and constructive unfair dismissal

Unfair dismissal claims. In some circumstances, employers can have protected conversations with employees.
In some circumstances, employers can have protected conversations with employees.

What is a protected ‘without prejudice’ conversation and what rules apply when an employer wants to negotiate with an employee off the record? Sarah Calderwood, employment partner at Manchester law firm Slater Heelis LLP looks at the rules of pre-termination negotiations, including how employers can lower the risk of constructive unfair dismissal claims.

Pre-termination negotiations, or without prejudice conversations, can be used by employers to negotiate the exit of employees from their business without the need to follow a fair procedure to lead to dismissal. They can of course also be used to settle potential claims before someone has started work with a business or after an employee has left the business. This article concentrates on the conversations being used with employees who are still employed.

There are two ways to start without prejudice conversations with employees, the traditional method is under the ‘without prejudice’ rule and the new method recently introduced by the Government under Section 111A of the Employment Rights Act 1996.

Without Prejudice Rule

The without prejudice rule generally prevents statements (written or verbal) made in a genuine attempt to settle an existing dispute from being put before the court as evidence against the party that made the statements.

To rely on the without prejudice rule, a dispute must have arisen prior to the without prejudice conversation being held. By way of example, the start of a disciplinary process must have been initiated with a letter sent to the employee outlining allegations and then an initial investigation meeting held.

Where the employee denies the allegations, there is a dispute and it is then possible to have a without prejudice conversation. Similarly, where an employee has raised a grievance and, after following the grievance procedure, the decision does not uphold the employee’s grievance there will again be a dispute and a without prejudice conversation can be held.

However, there are exceptions that mean a conversion would not fall under the without prejudice rule. If an employer simply starts a without prejudice conversation prior to any dispute arising, then this is not a protected conversation and the employee could rely on the conversation to claim a fundamental breach of contract, resign and claim constructive unfair dismissal.

In addition, the without prejudice principle does not apply if it would cloak perjury, blackmail or other unambiguous impropriety, in which case, the employee could refer to the without prejudice conversation on an open basis and use it as grounds for their resignation for a constructive unfair dismissal claim (based on breach of the implied term of trust and confidence).

Section 111A Employment Rights Act 1996

A Section 111A discussion allows employers to have protected conversations with employees without the need for there to be a dispute, however this route can only be used in limited circumstances.

Section 111A conversations do not protect settlement discussions where there are allegations of discrimination nor do they apply to automatically unfair dismissals. This means there is a big risk in using this option as an employer can never know what possible claims may be brought by an employee. After a discussion about their performance and a section 111A offer, the employee could choose to raise issues of discrimination and submit a discrimination claim as well as an ordinary unfair dismissal claim. The employee would then be able to refer to the Section 111A discussions in relation to their discrimination claim.

In addition, if the employee states that the Section 111A discussion contained improper behaviour then the tribunal may allow the pre-termination negotiations to be admissible at a Tribunal Hearing even where the claim is unfair dismissal. Improper behaviour can include putting an employee under undue pressure such as giving a very short time limit for agreeing to a settlement offer or threatening the employee that they will be dismissed if they do not accept the offer made.

As an employer conducting settlement negotiations, it is therefore important that the employee is given a reasonable amount of time to consider the offer made and if they don’t accept the offer, possible alternatives are made clear i.e. that they may be disciplined or they may be dismissed.

Where an employer is found to have behaved improperly during a Section 111A discussion or where allegations of claims that are not covered by Section 111A are made then the Section 111A conversation is not protected. The employee may then choose to rely on the conversation as a final straw argument to resign with immediate effect and claim constructive unfair dismissal.

Employers should ensure they clearly understand all the limitations before starting a Section 111A discussion.

The best option

In the case of Brodie v Nicola Ward UK EAT/0526/07 the employee was offered a settlement agreement through a without prejudice letter. She argued that this was the final straw and resigned with immediate effect and claimed constructive unfair dismissal. She argued that the without prejudice letter should be admissible due to dishonesty and unambiguous impropriety however the EAT rejected this because Ms Brodie had already entered a dispute with her employers in respect of contractual sick pay and therefore the without prejudice letter was correctly in response to a dispute and an attempt to make a genuine settlement.

However, if this case had been dealt with under the Section 111A route where no dispute had been in place and the employee had alleged discrimination, then the employee would have been able to rely on the without prejudice conversation as a final straw.

It is therefore safer to deal with settlement negotiations through the first route i.e. to have a without prejudice conversation when a dispute between the employer and the employee arises. It’s important to remember that in most cases any formal disciplinary or grievance process should commence prior to a without prejudice conversation being held.

 

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