It is commonplace for employers to enter into settlement negotiations with their employees prior to termination of their employment. Where there is a genuine dispute at the heart of the negotiations, it is well established that these discussions will usually be covered by without prejudice privilege. If settlement can't be reached, whilst the detail of the negotiations will be inadmissible in a Court or Tribunal, the fact of the negotiations themselves will be disclosable (if the parties so wish).

Since 29 July 2013, it has been possible for an employer and an employee to have a 'protected conversation' about ending the employment relationship in cases where there is no existing dispute between them. The protected conversation should not then be referred to in relation to any subsequent unfair dismissal claim – although the extent to which this is the case has, before now, been unclear. This is a useful tool for employers who might want to exit an employee with whom there is no existing dispute.

We now have some guidance on the extent to which protected conversations (and the documents relating to them) are admissible as evidence. In Faithorn Farrell Timms LLP v Bailey (UKEAT/0025/16), the Employment Appeal Tribunal (EAT) held that, in relation to protected conversations, the fact of the negotiations is inadmissible as well as the content. Further, the EAT held that internal communications (for example, between managers and HR) relating to protected conversations, are also inadmissible. This statutory 'privilege', said the EAT, cannot be waived. This goes further than without prejudice privilege. That's a good start for employers who want to be able to have these protected conversations without them being later used against them in relation to an unfair dismissal claim (which may arise if settlement can't be reached).

This poses two problems for employers. The first is that, where an employer is taking an employee through a disciplinary or grievance procedure, they might delay the procedure to have a protected conversation and engage in settlement negotiations. If the parties are not able to make reference to the fact of the protected conversation (as well as the content), then an employer will be unable to explain any such delay in the process to a Tribunal when defending a claim for unfair dismissal. To deal with this, employers should consider whether they need to continue the open process alongside the protected conversation so that there is no unexplained delay.

The second problem is that the shield provided by protected conversations only applies to unfair dismissal claims. Where an employee brings a claim for discrimination, both the fact and detail of the protected conversation are admissible as evidence (unless there is a dispute, in which case without prejudice privilege is likely to apply).

It is easy to imagine that, where a protected conversation takes place, an employee who previously has had no dispute with their employer goes on (rightly or wrongly) to form the impression that it is because of their sex/race/age/disability or otherwise that their employer has sought to push them out. Where that is the case, it is likely that a dispute would arise. Once there is a dispute, any settlement negotiations would be covered by without prejudice privilege. However, the protected conversations that took place before the dispute arose would not be covered by without prejudice privilege – and in relation to the discrimination claim would potentially be admissible.

A situation might therefore commonly arise where a Tribunal is required to consider the fact and detail of a protected conversation in relation to a discrimination claim, but has to proceed on the basis that it knows absolutely nothing about it for the purposes of an unfair dismissal claim. Whether or not a Tribunal is really able to do that when the relevant information is so clearly within its knowledge is a difficult matter (for it). Employers who are having protected conversations (where there is no existing dispute) should be mindful of the fact that although at the time there is no reason why those conversations would be admissible, they may still well come before a Tribunal if things don't turn out as planned.