The Employment Appeal Tribunal has ruled that ‘without prejudice’ privilege did not apply to discussions between an executive and his employer about outstanding holiday pay on termination. In this case - Scheldebouw v Evanson - the rule did not apply because there was no pre-existing dispute between the parties. Furthermore, whilst it is possible to have ‘pre-termination negotiations’ even where there is no existing dispute, that separate statutory rule didn’t apply in this case either given the subject matter of the dispute was the employee’s wages not his dismissal. As a result, the settlement offer made by the employer which the employee wanted to refer to in his claim, was admissible.
The fact briefly. In September 2018 the Claimant, Martin Evanson, was told that the company no longer had a need for his role and so they arranged a meeting to discuss his possible retirement and outstanding holiday entitlement. There was no issue with his level of performance and the discussions were expected to be amicable. The discussions led to an offer by the company in October 2018 to pay him for 68 days of accrued holiday equating to around £68,000. Evanson rejected that offer as rejected and made a counter-offer for 200 days equating to around £81,000. That was rejected by the company and, ultimately, negotiations broke down. Subsequently there was correspondence between the parties but none of it was marked ‘without prejudice’. Evanson went on to bring a tribunal claim for unlawful deduction from wages and he referred specifically to the offer made by the employer in the October 2018 meeting. The company argued that should be redacted on the basis it was in the context of ‘without prejudice negotiations’ but that was rejected by the tribunal – when the offer was made the parties were not in dispute, so the protection did not apply. On appeal the EAT agreed and confirmed the scope of the rule – that there must be actual, or reasonable contemplation of litigation. In this case the meetings were amicable with no threat of dismissal. The parties were discussing matters they fully expected to resolve and litigation was only contemplated later, when the negotiations broke down and their positions hardened.
The case serves as a useful reminder of the limits to the common law ‘without prejudice’ rule in cases where there’s no fault. It also demonstrates the limits of the statutory ‘protected conversations’ rule under section 111A of the Employment Rights Act 1996. So, whilst section 111A is designed to help where there is no dispute, it only applies is cases ordinary unfair dismissal. So, in a wages dispute, as in this case, it doesn’t apply.
So, how should employers go about framing a discussion to best protect themselves when having these settlement discussions? Earlier Linda Jones joined me by video-link and it’s a question I put to her:
Linda Jones: “Well, in the workplace, quite often, you haven't got to the point where you can really have a proper ‘without prejudice’ conversation and that's because for a conversation to be ‘without prejudice’, and therefore something that won't be reported in any subsequent litigation, there has to be a dispute, or a genuine prospect of a dispute. So, if you've got a situation where the employee has already gone to ACAS, for example, and initiated early conciliation then you could probably safely say that there's going to be a dispute there so you could then enter into a ‘without prejudice’ conversation. But on the other hand, if it's simply a situation where you've decided that somebody, for example, is underperforming and you want to start talking to them about what they should leave the business, there's no dispute there so you can't really, in that situation, label that as a ‘without prejudice’ conversation, you'd have to look instead at using a protected conversation under section 111A of the Employment Rights Act.”
Joe Glavina: “Does the mere existence of a grievance necessarily means that there's a dispute for the purposes of the ‘without prejudice’ rule?
Linda Jones: “I think the mere existence of a grievance doesn't create enough of a dispute for there to be genuine ‘without prejudice’ conversation and that has actually been discussed and established in a number of cases because raising a grievance is part of an employer's normal HR procedures, there’s a grievance there which invites employees who are unhappy about something to raise a grievance and that doesn't necessarily mean that they're going to end up litigating and, in fact, most of them won't end up litigating. So, I think that it's a mistake and can lead to the employer being exposed if they start trying to have a ‘without prejudice’ conversation of the back of a grievance.”
Joe Glavina: “You’ve mentioned section 111A and so-called protected conversations and how they’re useful in cases where there’s no dispute but in the 10 years since that provision came into force, we’ve seen very little case law on the point which makes me think it isn’t used very much by employers. Why is that do you think?”
Linda Jones: “I think employees find it a bit clunky to be perfectly honest. It’s not really that clear how you set about doing it. There's an ACAS code of practice that sits alongside it that suggests that there has to be a 10 day cooling off period and that there are certain formalities that have to be engaged in if it's to comply with the ACAS code of practice. I think just the terminology - everybody uses the shorthand of ‘protected conversation’ but that's not actually the full terminology used in the legislation so I think it's just a bit of a clunky piece of legislation. But I think it's it can be quite useful, actually, because what it does do is in a scenario where you haven't got an existing dispute but you want to start talking to somebody about possibly whether they might want to leave the business, and that might be because they're not performing very well, or it might be in a redundancy situation, for example, it just provides a useful gateway, or starting point, to have those conversations and to say to somebody ‘can we have a protected conversation’? You then have to go on to explain to the employee what a protected conversation actually is and I think, again, that's a bit off-putting for employers because quite often they don't even know themselves what it is. But if you can get your head around that, and then you might want to make some commercial decisions about whether or not you actually think you need the 10 day period, then I think it can be quite useful. But what I always say to clients, and the key point to bear in mind, is that if the employee is alleging any sort of discrimination they could rely on the exception in the legislation and say, oh, it's an improper conversation and therefore it's not covered by section 111A. So I always advise employers in those discussions not to say anything that they wouldn't be embarrassed to say if it was an open court. So, in many ways the best way of thinking about it is not necessarily that it's not going to come out in open court, but it's just a mechanism to enable you to start a discussion with an employee about whether or not they might want a settlement agreement.”
That case is a decision of the Employment Appeal Tribunal called Scheldebouw v Evanson. We’ve put a link to the judgment in the transcript of this programme.