In Faithorn Farrell Timms LLP (FFT) -v- Bailey, the EAT considered the differences between protection offered by “without prejudice” privilege and “protected conversations” in pre-termination negotiations. This is the first appellate decision on the scope of protected conversations and their interaction with the common law without prejudice rule.
Mrs Bailey commenced settlement discussions with FFT after they made it clear that her part-time working arrangement would not be continued. Various correspondence about settlement was exchanged, but agreement was not reached and Mrs Bailey issued claims for constructive unfair dismissal and sex discrimination. Both Mrs Bailey and FFT referred to the settlement discussions in their Tribunal claim and response forms but an issue arose on the extent to which the settlement discussions could be admitted in evidence.
Under the common law without prejudice rule, details of settlement discussions are normally inadmissible in evidence in a Court or tribunal. However, the protection only applies where the parties are already in dispute and not where, for example, an employer simply wishes to initiate discussions with a view to concluding a Settlement Agreement. In July 2013, a new concept of “pre-termination negotiations” (also known as “protected conversations”) was introduced, which allows the parties to hold confidential settlement discussions even where there is no dispute without the risk that they can be disclosed in ordinary unfair dismissal proceedings if the negotiations break down. However, importantly, the protection does not apply to automatically unfair dismissals or other claims such as discrimination.
In this case, the EAT considered for the first time the distinction between without prejudice discussions and protected conversations.
It held that both the fact that protected conversations had taken place and the details of any discussions or offers made were inadmissible in a subsequent employment tribunal claim for unfair dismissal. The prohibition against disclosure therefore goes further than without prejudice privilege which allows reference to negotiations having taken place, although prevents disclosure of the details.
The EAT further held that privilege in relation to protected conversations cannot be waived unless there is “improper behaviour” on the part of the employer (such as putting undue pressure on an employee to settle), a concept which the EAT confirmed was wider than the limited “unambiguous impropriety” exception to without prejudice privilege.
This is a further contrast with privilege under the common law without prejudice rule which can be waived if both parties unequivocally consent.
Whilst it is helpful for employers to be able to have confidential “off the record” conversations with employees, the distinctions that arise between the statutory concept of protected conversations and the common law concept of without prejudice discussions can give rise to complications as to where the line is drawn. Further, where there are multiple claims, tribunals may be required to admit evidence in relation to, say, a discrimination claim but ignore it in the context of an unfair dismissal claim – a rather tortuous task. Employers should also bear in mind that, if they wish to engage in protected conversations, they should ensure that evidence that they do wish to rely on is set out in open communications that are clearly separate from any protected conversations.