Where there is a pre-existing dispute between an employer and an employee, they can enter in to without prejudice negotiations with a view to reaching agreement to bring the employee's employment to an end. Details of such negotiations will be inadmissible in evidence before a court or employment tribunal, but the fact that without prejudice negotiations have taken place may be admissible even if the content is not. It is also possible for the parties to waive privilege in relation to without prejudice negotiations.
Under Section 111A of the Employment Rights Act 1996 (s.111A), it is also possible for employers and employees to have confidential discussions, referred to as 'pre-termination negotiations' or 'protected conversations', with the aim of agreeing to terminate the employee's employment, where there is no pre-existing dispute. These discussions will be inadmissible as evidence in any subsequent employment tribunal proceedings for unfair dismissal only. A 'protected conversation' will lose its confidentiality if there is any improper behaviour, for example if an employer places undue pressure on an employee to accept any terms offered.
In Faithorn Farrell Timms LLP v Bailey, Mrs Bailey brought claims of constructive unfair dismissal and indirect sex discrimination against her employer, Faithorn Farrell Timms LLP (Faithorn).
Both parties referred to their settlement negotiations and correspondence in the pleadings to the claim.
At a preliminary hearing the issue of admissibility was raised and there was an appeal to the EAT.
The EAT concluded that legal position regarding without prejudice discussions was not applicable to pre-termination negotiations and that 's.111A had to be read on its own terms'. As such, although the parties had waived their rights to 'without prejudice' privilege on the basis that they referred to the privileged material in the pleadings, s.111A confidentiality could not be waived.
The EAT also clarified that the scope of s.111A extends to:
The result of this decision was that the fact and content of the negotiations were not admissible for the purposes of the unfair dismissal claim, pursuant to s.11A, but were admissible for the purposes of the discrimination claim, as 'without prejudice' privilege had been waived.
The EAT remitted back to the Employment Tribunal the question of whether Faithorn had behaved improperly and could not rely on s.111A.
This case helps to clarify the scope of s.11A in relation to pre-termination negotiations.
However, employers should always be mindful of the way they approach pre-termination negotiations. Improper behaviour or a lack of sincerity in the negotiations can result in an employer being unable to rely on s.111A or without prejudice privilege.
In each case employers should also consider whether their position should be set out in open correspondence as otherwise this could result in large gaps in evidence where all information is contained within negotiations pursuant to s.111A.