The law recognises that employers need to be able to initiate settlement discussions with their employees without fear of those discussions being used as evidence against them. In a case concerning the Without Prejudice rule, in Garrod v Riverstone Management Ltd the Employment Appeal Tribunal recently clarified when an employer and employee are in ‘dispute,’ for the purposes of having a Without Prejudice discussion.
This case serves as a useful reminder to employers of when they can safely instigate settlement discussions with their employees without fear of those discussions becoming used against them in legal proceedings.
Garrod v Riverstone Management Ltd
Mrs Garrod was employed by Riverstone Management Ltd. as their Company Secretary, and she submitted a grievance in which she alleged mistreatment, bullying, harassment, and pregnancy and maternity discrimination. In a meeting with Mrs Garrod and her husband, Human Resources asked Mrs Garrod whether she wanted to have a ‘Without Prejudice’ discussion. The adviser described the employment relationship as being fractured, and offered Mrs Garrod a sum in the region of £80,000 in return for her employment coming to an end. A settlement could not be agreed, Riverstone Management subsequently rejected Mrs Garrod’s grievance and she eventually resigned from her employment.
Mrs Garrod brought various Employment Tribunal claims against her employer, including constructive unfair dismissal, harassment and maternity discrimination. Mrs Garrod referred to the settlement discussion as evidence of discrimination against her and argued that the discussion was admissible because she was not in ‘dispute’ with her employer at the time of the discussion.
Both the Employment Tribunal and the Employment Appeal Tribunal disagreed and held that Mrs Garrod’s grievance constituted a ‘dispute, and the negotiation was a genuine attempt to settle it. The Without Prejudice rule therefore applied, and Mrs Garrod was unable to refer to the settlement discussions in her Employment Tribunal claim.
Whilst there are circumstances where employers can safely instigate settlement negotiations with their employees, the protection is not absolute and only applies in certain circumstances.
Whilst there are limited exceptions, verbal and written settlement negotiations will generally be protected under the Without Prejudice rule where:
- There is a dispute between the parties;
- The communication is a genuine attempt to try and settle it; and
- If a legal claim has not already been submitted, in the course of negotiations the parties reasonably contemplated litigation.
In this case, Mrs Garrod’s grievance constituted a ‘dispute’ because it referred to possible Employment Tribunal claims and referred to mediation through the Acas Early Conciliation process. However that is not to say that every grievance means there is a ‘dispute’ and that legal proceedings are contemplated; much will depend on the nature of the grievance itself.
Another mechanism that allows employers to safely initiate settlement discussions with employees is through a Pre-Termination Negotiation, which is protected under Section 111A of the Employment Rights Act 1996. Or, as they are more commonly known, ‘protected conversations.’
A ‘protected conversation’ under Section 111A provides more flexibility in that there does not have to be an underlying dispute for an employer to instigate the conversation. However, the level of protection is limited in that the conversation is only inadmissible in claims for general unfair dismissal. The fact that a ‘protected conversation’ took place (and the amount offered) can be referred to as evidence in any claim for automatic unfair dismissal, discrimination, wrongful dismissal or unlawful detriment.
Consequently, when considering settlement discussions with employees, employers need to first consider which type of discussion they are having. If it is a ‘protected conversation’ under Section 111A, employers should bear in mind that the conversation is only protected from disclosure in claims for general unfair dismissal. If it is a Without Prejudice discussion, the criteria outlined above must be present before the communication will genuinely be protected. In practice, in a rush to have these conversations, employers often do not consider these points beforehand and the result is that they are not as protected as they think they are.
For more information, please contact a member of the Employment Team.