The concept of “pre-termination negotiations” or “protected conversations” was introduced on 29 July 2013 and allows employers and employees to have confidential discussions about ending the employment relationship, safe in the knowledge that anything said during the negotiations will not be used against them in subsequent tribunal proceedings. As long as they are carried out in accordance with the provisions of section 111A of the Employment Rights Act 1996 then they can’t be referred to in any Employment Tribunal proceedings for unfair dismissal (with the exception of automatically unfair dismissal claims). There has been some uncertainty as to the extent and the scope of pre-termination negotiations but last week the Employment Appeal Tribunal handed down its first judgment on the matter.
Faithorn Farrell Timms LLP v Bailey
Mrs Bailey was employed as an office secretary by Faithorn Farrell Timms LLP (FFT), a firm of surveyors which employs around 80 people. She was employed from March 2009 until her resignation in February 2015, which she claims amounted to unfair constructive dismissal.
She had worked on a part-time basis but says that towards the end of 2014, FFT made it clear that part-time working was no longer an option. She initiated discussions about the possibility of entering into a settlement agreement.
Letters were exchanged which were marked “without prejudice”, and which set out the parties’ respective positions and referred to the pre-termination discussions that had taken place. She then raised a grievance, part of which was that there was an underlying strategy to bully her out of her role to avoid a financial settlement, and she referred to the contents of the without prejudice letters. Mrs Bailey said that further letters from FFT marked “without prejudice” contained threats and ultimatums, and said that she was going to use it as more evidence of their threatening and bullying behaviour. In the normal course of events, where a genuine attempt is being made to settle a dispute, details of negotiations are inadmissible if the letter is marked without prejudice.
Mrs Bailey commenced Employment Tribunal proceedings against FFT claiming unfair constructive dismissal and sex discrimination. In the claim she referred to the fact that she had started pre-termination negotiations in December 2014 after it was made clear to her that part- time working was not an option and she felt she had no choice but to resign. She relied on her treatment thereafter as bullying and discrimination and she referred to letters that has passed, including the ones marked without prejudice. Later on in the proceedings an issue arose as to the admissibility of those documents and the fact that discussions had taken place; FFT argued that they could not be relied upon as they were without prejudice. Therefore before any findings were made on Mrs Bailey’s substantive claim, the Employment Tribunal had to decide whether or not the “without prejudice” letters and the fact that negotiations had taken place were admissible as evidence, meaning that Mrs Bailey could rely upon them.
Employment Tribunal (ET)
The ET concluded that the without prejudice letters were admissible. It noted that section 111A only applies to cases of unfair dismissal (including constructive unfair dismissal); it does not apply to other claims, and Mrs Bailey had also brought a sex discrimination claim. It said that section 111A is restricted in scope so that it only protects the details of any offers made/contents of discussions held, and not the fact that they have taken place.
Mrs Bailey maintained that FFT had waived any privilege over the without prejudice letters as it didn’t take issue with her referring to them. She also said that FFT’s actions during the negotiations amounted to improper conduct, meaning that the discussions were admissible under section 111A. FFT appealed and Mrs Bailey cross appealed.
Employment Appeal Tribunal (EAT)
The EAT upheld both appeals in part.
It held that the protection of section 111A does not just extend to the content of protected conversations, but also to the fact that the discussions have taken place. The Judge went even further and recognised that it is common for a manager to have to report to a Board, higher management or HR on any such discussions that have taken place, and said that it would run counter to the purpose section 111A if evidence of those reports were admissible. Therefore, in certain circumstances, internal communications referring to settlement discussions will also be inadmissible in any claim of unfair dismissal.
The Judge observed that the protection under section 111A only applies to proceedings relating to unfair dismissal. In circumstances such as here where there is an additional claim (for e.g. discrimination) a tribunal would allow the evidence to be admitted for the additional claim but not for the unfair dismissal claim.
Unlike common law “without prejudice” rules the EAT also held that privilege under section 111A cannot be waived, even with the agreement of the parties.
Mrs Bailey had argued that FFT’s conduct had amounted to improper behaviour and therefore the discussions were admissible. The ACAS Code of Practice on Settlement Agreements gives examples of improper behaviour including but not limited to undue influence, harassment, bullying, intimidation and discrimination. The case was remitted to the ET to determine that issue.
This decision provides some helpful guidance to employers on the intricacies of section 111A and the protection that it offers. In particular, it has clarified that parties are not able to refer to the fact that pre-termination negotiations have taken place in order to bolster their positions, and unlike the rules relating to without prejudice communications, the parties cannot waive the privilege that applies to such discussions, even by agreement. However to avoid any such arguments, it would be good practice to take issue early on with any attempts in a claim by the other party to refer to protected conversations or without prejudice correspondence.
It serves as a reminder that having discussions on this basis is not a straightforward process, and that it is paramount that the necessary rules are complied with in order to benefit from the protection. There are also fundamental differences between the way that section 111A and the without prejudice regime work in practice.
The decision raises a question as to the practical difficulties in how tribunals will deal with evidence relating to pre-termination discussions when hearing other claims such as discrimination, and disregarding that same evidence where there is an unfair dismissal claim arising from the same facts.
It is also a reminder that the protection afforded by section 111A will not apply where there is improper behaviour and employers should conduct such negotiations as though their comments could ultimately end up being seen by a tribunal.
If you have any queries in relation to settlement discussions, terminating the employment relationship or any other HR queries then please contact Joanne Holborn, Tom Scaife or Caroline Rayner on 01228 552600 or 01524 548494.