'Without Prejudice' Letter Deemed Inadmissible in Proceedings Despite Containing Exaggerated Allegations
In a recent decision, the EAT held a letter proposing settlement terms was inadmissible in tribunal proceedings, despite the fact it contained exaggerated allegations about the employee's conduct.
What Is the 'Without Prejudice' Rule?
The 'without prejudice' rule prevents statements made in a genuine attempt to settle an existing dispute from being put before a court or Tribunal as evidence in proceedings. The purpose of the rule is to facilitate settlement by allowing the parties to speak freely in the knowledge that what they say will not be used against them if the matter proceeds to a hearing. However, the are some exceptions to the general freedoms the rule allows. One such exception permits a party to give evidence of what the other said or wrote in without prejudice negotiations, if the exclusion of the evidence would act as a "cloak for perjury, blackmail or other unambiguous impropriety".
A Recent Claim of Discrimination
In the case of Swiss Re Corporate Solutions Ltd v Sommer, Mrs Sommer was employed by SRCS Ltd as a political risk underwriter. Some months after her return from maternity leave, she was informed her post was at risk of redundancy. She raised a grievance relating to her treatment and as part of the grievance process, sent a number of emails internally, which she copied to her personal email address, and in some cases blind copied to her husband. The emails contained information and documentation containing personal data and confidential information.
She brought claims for race, sex, equal pay and pregnancy/maternity discrimination on 22 January 2021. On the same day, SRCS Ltd's solicitors wrote a 'without prejudice' letter making an offer of settlement. As well as setting out the terms of the offer, the letter made a number of allegations against her and suggested these could result in her summary dismissal, criminal convictions, fines, and/or findings of a breach of the Conduct Rules of the Financial Conduct Authority.
Mrs Sommer applied for the letter to be disclosed in evidence against her employer. At Tribunal, Mrs Sommer was successful, and the letter was deemed admissible on the basis it constituted 'unambiguous impropriety', namely that it "grossly exaggerated" Mrs Sommer's conduct in order to put her under pressure to accept the settlement terms. SRCS Ltd appealed to the Employment Appeal Tribunal (EAT).
What Did the EAT Say?
The EAT allowed the appeal. Whist the allegations were exaggerated, they were not completely untrue. A finding of unambiguous impropriety can only be made in a very clear case. The Tribunal had focused on the fact SRCS Ltd appeared to suddenly decide Mrs Sommer's conduct was of utmost seriousness at a time when it also wanted to terminate her employment. It should instead have considered the merits of the specific allegations made in the without prejudice letter, and the fact that on the facts, there was some basis to the allegations.
Taking all this into account, the unambiguous impropriety exception to the without prejudice rule did not apply. The letter will be inadmissible in evidence at the merits hearing.
What Should Employers Note About the 'Without Prejudice' Rule?
The without prejudice rule allows the parties a lot of freedom to speak openly if they are making genuine attempts to settle a case. However, this freedom does not stretch to making false or unfounded allegations of criminal activity or other wrongdoing.
In this case the EAT judge made it plain that whilst the employer's letter had not fallen into the category of 'unambiguous impropriety', it had sailed close to the wind.
If using examples of an employee's wrongdoing in without prejudice settlement negotiations, make sure that there is a reasonable foundation for what is being said.