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The concept of ‘protected conversations’ or, as it is specifically framed in the legislation, “pre-termination negotiations” was introduced, in July 2013, by section 111A of the Employment Rights Act 1996. As a result, employers have been arguably more able to engage in confidential, frank discussions with employees concerning termination and parting on mutually agreed terms without the employee being able to refer to these in any subsequent legal proceedings - referred to in a legal context as “inadmissibility”. The legislation effectively extended the inadmissibility of such discussions thereby going beyond the existing common law “without prejudice” principle.

Up until now we have had no case law testing the scope of this form of statutory privilege. However, the recent Employment Appeal Tribunal case of Faithorn Farrell Timms LLP v Bailey has made some important finding about the scope and effect of the provision. As such, now is a good time to recap on where we are in respect of both the without prejudice principle and the protected conversation legislation.

Without Prejudice Principle

Prior to July 2013, in order to protect the inadmissibility of pre-termination discussions, employers had to rely on the “without prejudice” principle. This generally prevents statements made in a genuine attempt to settle an existing dispute from being put before a court or Tribunal, as evidence. However, in the employment context this often does not offer sufficient protection, as employers and employees frequently prefer to have exploratory discussions prior to any dispute arising. The risk from an employer’s point of view is that an employee who does not wish to engage in “without prejudice” discussion about termination may seek to refer to such discussions in legal proceedings against the employer, perhaps arguing that the attempt to terminate the contract was a breach of the implied term of trust and confidence and therefore a basis for a claim of constructive unfair dismissal.

The without prejudice principle does not apply where parties are not yet in dispute and no litigation is in contemplation. Whether there is a live dispute will very much be fact dependant and, while concluded disciplinary proceedings will often point toward a dispute, simple grievances are much less likely to do so (BNP Paribas V Mezzotero). There is a further limitation to the rule in that it will not apply where the exclusion of evidence would act as a cloak for perjury, blackmail or other “unambiguous impropriety”. The latter can extend to discriminatory comments made during the course of discussions but subsequent case law has found that this is only the case where there is “blatant discrimination”.

Section 111A ‘protected conversations’

The purpose of section 111A was to prevent pre-termination discussions being used as evidence in any subsequent unfair dismissal claim. The big advantage of the legislation being that it and can be relied upon in the absence of any existing dispute. The intention was that employers and employees would be able to have frank, productive conversations with less fear of these being referred to in subsequent Employment Tribunal proceedings. At the same time it was hoped that it would no longer be necessary for employers to try to engineer disputes when seeking to rely upon the existing without prejudice principle.

An important point to note, however, is that the inadmissibility rule under section 111A applies in respect of ordinary unfair dismissal proceedings only and therefore excludes cases where the Claimant is bringing claims such as; automatically unfair dismissal, discrimination and breach of contract.

Additionally, section 111A (4) provides that, if either party engages in ‘improper behaviour’, then evidence of pre-termination negotiations will only be inadmissible to the extent the Tribunal considers just. This means that, where one party has behaved improperly, the court or Tribunal has discretion to allow evidence of some (or all) of the discussions. The ACAS Code on Settlement Agreements, which Tribunals require to take into account, provides examples of improper behaviour including; threatening the employee with dismissal if they do not sign any proposed agreement, bullying or intimidating the employee and not giving the employee reasonable time (stated to be normally a minimum of 10 calendar days) to consider any offer.

Faithorn Farrell Timms LLP V Bailey

This recent case has confirmed that any reference to the fact of section 111A pre-termination negotiations is inadmissible and not just the details of those discussions and communications. This means that the legislation extends further than the without prejudice principle, which does allow reference to the fact that negotiations took place. In so finding, the EAT also held the scope of protection covers not just direct discussions and communications between the employer and the employee but also those taking place internally, such as communication between management and Human Resources. It said it would be common for higher management (or HR) to be involved in any such discussions and it would run counter to the purpose of the legislation if such communication was later to be admissible.

The EAT further held that privilege under section 111A cannot be waived (or given up), again unlike under the without prejudice principle. This means that an employee cannot rely on pre-termination discussions, even if the employer would be willing to give up the protection, or could be said to have already done so by their conduct. Finally the EAT found that the section 111A concept of “improper behaviour” is wider that the “unambiguous impropriety” exception. The statutory language therefore provided a broader approach to the behaviour in issue and a greater degree of flexibility for the Tribunal in determining whether the protection should be removed in the particular circumstances of a case.

Practical Implications

The case provides useful confirmation that section 111A does, in certain circumstances, offer the opportunity for termination discussions to take place in the absence of a dispute and that the very fact of such discussions, not just their content, will be protected. Moreover the clarification that the scope of protection extends to the employer’s internal discussions about pre-termination negotiations is particularly welcome, in an age when it is common for employees to seek to recover copies of (for example) e-mail correspondence between management and HR - the disclosure of which might be prejudicial in the context of actual Tribunal proceedings.

However, it is important to remember that important limitations to this legislation remain including the fact that discussions will only be inadmissible in the context of ordinary unfair dismissal claims. If there is the slightest suggestion of any automatically unfair reason (e.g.: asserting a statutory right, carrying out trade union activities or whistleblowing) for dismissal, or a discriminatory motivation, this legislation is unlikely to assist. In such circumstances, relying on the without prejudice principle is likely to be the only viable option.

Additionally, the inherent nature of section 111A discussions means they are likely to be fraught and could well give rise to the suggestion they have been conducted improperly. We would always recommend that specific advice be taken when seeking to found on either section 111A or the without prejudice principle.

Euan Smith, Associate

Chambers UK 2018

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