When without prejudice communication stops being off the record

Settlement agreements can be a hugely useful tool for employers. If the terms and money on offer are right, then a settlement agreement can result in the safe exit of an employee. The employee gets some money and a graceful departure and you get the certainty of knowing that litigation rights in the employment tribunal have been surrendered. The process means that you can achieve the termination of employment without going though an investigatory procedure or a disciplinary process or trouble with the time of performance improvement.

Habitually, attempts at achieving settlement begin with an off the record discussion or a piece of correspondence. Both are intended to be ‘without prejudice’. So, what can you say off the record? How far do you go to incentivize and encourage settlement? If settlement is not achieved and the employee is subsequently dismissed, is your discussion still confidential?

The starting point is that evidence of any negotiations is admissible in subsequent litigation. Plainly, any such disclosure is unhelpful in the defence of unfair dismissal claims. However, confidentiality can be preserved under the without prejudice rule and under the rule concerning ‘pre-termination negotiations’ (Section 111A Employment Rights Act 1996). These are also known as ‘protected conversations’.

This means that communications are inadmissible as evidence and cannot be made the subject of a disclosure order. For that WP rule to apply there must be a dispute between the parties and the communication must be made for the purpose of a genuine attempt to compromise or settle it. But please remember that there are limits to the application of this rule. WP communications will lose confidential status and become evidence for use at court ‘if the exclusion of the evidence would act as a cloak for perjury, blackmail or other unambiguous impropriety’.

So, whatever you do or say please remember that it cannot be unambiguously improper. But what does that actually mean? A recent case helps to shed light on the scope of that definition.

The employee was a political risk underwriter for the respondent insurer. She returned from maternity leave on 1^st July 2020 then on 9^th October 2020 she was put at risk of redundancy (she was the only person in her team). On 19^th October 2020 she raised a formal grievance by email and cc’d her private email address and bcc’d her husband.  On 14^th and again on 17^th November 2020 she sent two further emails concerning her grievance which were also copied to her private email address. Both emails contained information about transactions with clients. On 16^th December 2020 her employer dismissed her grievances. Then on 6^th January 2021 the employer’s HR manager told her that the copying of the three emails to herself and her husband was a ‘low level’ data breach, stated that the information should be deleted and requested an explanation. The employee said that they were for her grievances and, when the particular items were identified, she deleted them as requested. The employer did not let the matter rest. On 19^th January 2021 a disciplinary investigation into the breach was opened.

On 22^nd January 2021 the employee made various race, sex and pregnancy discrimination and equal pay claims. On the same day the employer’s lawyer sent her a without prejudice letter detailing the data breaches and her denial that she had sent anything to her husband. The letter suggested that this could result in summary dismissal, criminal convictions (for knowingly disclosing personal data without consent), fines and/or findings of a breach of the FCA rules. The letter asserted that this might result in her being unable to find alternative work in the regulated sector. Finally, the letter offered £37,000 in settlement terms.

Meanwhile in February 2021 the disciplinary investigator sensibly found that there had been only a technical data breach that did not warrant formal disciplinary action. The employer then went on to continue with the redundancy process. The employee was made redundant with effect from 16^th April 2021.

The employee sought an order that the without prejudice letter should be admissible in the employment tribunal proceedings on the basis that, in the context of what the employer really knew about the ‘low level’ nature of the data breaches, the serious allegations it contained amounted to ‘unambiguous impropriety’.

Clearly, the ‘beefed’ up WP letter was evidentially useful for her case because it tended to show that the employer wanted to secure her departure by any means and thus that the redundancy process was a sham.

The judge reed that the WP letter was admissible because there was no basis at all for the assertions that the employee’s actions justified summary dismissal and criminal sanctions. The judge stated that the employer’s solicitors ‘grossly exaggerated the severity of what she had done in order to put pressure on her to accept what they proposed, namely the immediate termination of her employment’. The judge was ‘satisfied that the making of those threats in those circumstances was an abuse of the privilege and that they unambiguously exceeded what was permissible in settlement’.

The judge on appeal disagreed with this and said that the letter was inadmissible on the basis that the original judge determined the issue on whether the allegations were ‘without foundation or grossly exaggerated’ instead of the correct test of ‘unambiguous impropriety’. There was no evidence that the employer was acting dishonestly or fraudulently although there was plainly exaggeration. The court appears to conclude that exaggeration will seldom pass the test for ‘unambiguous impropriety’. This meant that the employee could not rely on the letter in her claim for unfair dismissal.

Although the employer’s letter was still covered by the without prejudice rule, there is always a danger in overstating a position in correspondence and to be seen to be applying improper pressure. This letter was not completely free from impropriety was it? It contained an exaggeration of the true state of the evidence and the likely consequences for the employee. Stating that future career prospects will be damaged or ruined is a clear threat isn’t it? We always recommend that what you state in WP correspondence or during an off the record discussion should be a genuine and fair summary of your concerns and your intentions in terms of the process that you intend to commence. And no more. We do not suggest that you refer to the ultimate outcome or to personal or professional risks for the employee. A simple rule: only state by way of complaint to induce settlement what you would be later happy to re-state in a tribunal.