The ‘without prejudice’ rule in termination negotiations
The ‘without prejudice’ rule in termination negotiations
The EAT has held that an employer could not rely on evidence of negotiations with an employee over a settlement agreement to defend the employee’s whistleblowing dismissal claim. The evidence was inadmissible under the ‘without prejudice’ rule. Further, the rule could not be disapplied on the ground of ‘unambiguous impropriety’ just because the excluded evidence supported the employer’s defence that it was the employee who had suggested how his termination should be structured.
Dr Portnykh (Claimant) was dismissed by his employer, Nomura International Plc (Respondent). He presented an ET1 claiming automatic unfair dismissal on the ground of having made protected disclosures. The claimant alleged that the respondent had at no time given him a reasonable explanation for his dismissal. The respondent’s defence was that it had told the claimant that he would be dismissed by reason of misconduct, but that it was prepared to present the termination as a resignation. The claimant suggested structuring the termination as a redundancy dismissal, which the respondent agreed to. Subsequently, correspondence, including a draft compromise agreement, was exchanged between the parties on a ‘without prejudice’ basis. The respondent sought to rely on these documents as showing its version of the facts in order to defend the claim. However, the claimant argued that they were ‘without prejudice’ and, therefore, ‘inadmissible’.
At the pre-hearing review, the employment judge (EJ) determined firstly, that there was no ‘dispute’ in existence at the time the correspondence was entered into and therefore the ‘without prejudice’ rule did not apply. Secondly, the EJ held that even if the rule were engaged, it would be an abuse to allow the claimant to rely on it to exclude evidence showing that he requested that his dismissal should be characterised as redundancy. The EJ considered that this would amount to ‘unambiguous impropriety’; one of the recognised exceptions to the ‘without prejudice’ rule. The claimant appealed both these findings.
The EAT (HHJ Hand QC sitting alone) allowed the appeal on both findings after extensively reviewing the ‘without prejudice’ case authorities and reasoning as follows:
There was a ‘dispute’ capable of attracting ‘without prejudice’ privilege
- Looking at the facts prior to the exchange of correspondence, there clearly was a dispute in existence. Although there is not automatically a dispute whenever a compromise agreement is offered and considered, if the employer announces an intention to dismiss the employee for misconduct and then there discussions about an alternative manner of dismissal, it seems beyond argument that there is either a present dispute or the potential for a future dispute. Notwithstanding the facts prior to the correspondence, the existence of at least a potential dispute was evident from the correspondence itself.
- It is not necessary for any proceedings to be in existence, nor for any allegation of unfair dismissal or some other breach to have been raised for there to be a potential dispute. Further, the dispute which eventuates does not need to be exactly the same dispute as that which is in existence at the time a compromise agreement is offered.
- Interestingly, HHJ Hand QC suggested that the existence of negotiations between the parties might be sufficient to engage the ‘without prejudice’ rule if the parties have expressly or impliedly agreed that privilege will apply, even in the absence of a recognised ‘dispute’. However, he declined to rule on the point conclusively and did not need to in the present case. He noted that, in any event, in most instances where there are negotiations, the negotiations will be connected to a dispute and so the ‘without prejudice’ rule will apply.
‘Unambiguous impropriety’ exception did not apply
The EJ had not appreciated how limited the concept of ‘unambiguous propriety’ truly is – abuse of the privileged position is necessary. However, it not an abuse of the ‘without prejudice’ rule for a party simply to be disadvantaged by the exclusion of evidence.
Comment
Since 29 July 2013, new legislation was introduced with a view to enabling an employer to have a “protected conversation” with their employee to suggest and negotiate an agreed termination when the relationship is not considered to be working. The idea is that it will cover situations which appear to be beyond the reach of the ‘without prejudice’ rule because of the problem of showing an existing dispute. However, the new legislation is not without its drawbacks eg protected conversations do not apply to breach of contract and wrongful dismissal claims.
