In Graham v Agilitas IT Solutions Ltd (UKEAT/0212/17), the Employment Appeal Tribunal had to decide whether an employer could rely on parts of a 'without prejudice' discussion/protected conversation to take disciplinary action against an employee, while at the same time relying on privilege to shield its own conduct during part of the conversation.

Mr Graham was employed as a sales director by Agilitas IT Solutions Ltd (the company) from November 2013. He was also a shareholder in the company. Following an instruction from the company's executive board, Mr Lynn (the CEO) was instructed to hold 'without prejudice' conversations with Mr Graham regarding concerns about his performance and his sales. The first 'without prejudice' meeting was held between Mr Lynn and Mr Graham on 12 August 2015. Several similar 'without prejudice' meetings were held in the following 10 months. During the meetings various options were discussed regarding Mr Graham's employment, including performance improvements and dismissal, but no agreement was reached.

On 21 June 2016 Mr Graham was suspended pending an investigation into allegations of gross misconduct. The allegations against him were set out in a letter dated 12 July 2016 and included an allegation that he had spoken to a colleague about his perception that there was a conspiracy to remove him from the company. One of the disciplinary allegations the company relied on as amounting to gross misconduct was words spoken by Mr Graham to Mr Lynn during the course of the meeting held with him on 12 August 2015. The company contended that the disciplinary allegations led to concern about a possible breakdown in trust and confidence necessary to maintain an employment relationship with Mr Graham. Those allegations were ultimately found proven and the company concluded that Mr Graham's conduct amounted to gross misconduct or alternatively that there had been an irretrievable breakdown in the mutual relationship of trust and confidence.

Mr Graham was summarily dismissed on 9 August 2016 and brought claims of ordinary unfair dismissal, wrongful dismissal and unlawful deduction from wages. It was Mr Graham's case that the dismissal was predetermined and that the board of directors of the company wished to dismiss him irrespective of the issues raised in the letter of 12 July 2016 and throughout the disciplinary process because the board wanted to take over his shares. Mr Graham also believed his dismissal was in part in response to the fact that he had raised a grievance refusing to accept a change in his role from sales director to business development director, which involved a significant reduction in his salary.

Employment tribunal decision

A preliminary hearing was held by the employment tribunal (ET) and both Mr Graham and Mr Lynn gave evidence. The employment judge concluded that the conversations during the relevant meetings had all been on a 'without prejudice' basis and were 'protected conversations' under Section 111A of the Employment Rights Act 1996. The conversations were therefore not admissible so far as unfair dismissal proceedings were concerned or indeed as the proceedings as a whole were concerned. Mr Graham appealed.

Employment Appeal Tribunal decision

The Employment Appeal Tribunal (EAT) held that 'without prejudice' privilege applied in principle. However it also held that the company could not waive privilege on parts of the meeting and rely on privilege in respect of other parts of the meeting to shield its own conduct.

The ET had not considered whether the company had waived privilege by relying on what Mr Graham had said during the meeting between Mr Lynn and Mr Graham in August 2015 in his subsequent disciplinary hearing. The EAT held that Mr Graham had raised an arguable case on this point and there would be a glaring injustice if he were not permitted to run this point in relation to Section 111A of the Employment Rights Act 1996.

The EAT allowed the appeal and remitted the case back to the ET to evaluate the evidence and decide whether the company had, by its conduct, waived privilege in respect of the 12 August 2015 meeting and/or whether the company's reliance on part of the conversations by way of disciplinary allegations amounted to improper behaviour or conduct within the meaning of Section 111A(4) of the Employment Rights Act 1996.

The 'without prejudice' rule prevents statements made (either orally or in writing) in a genuine attempt to settle an existing dispute from being put before an ET as evidence of admissions. This case serves as a useful reminder to employers that they should be cautious when seeking to rely on labels attached to meetings. Whilst using the term 'without prejudice' is of course relevant, it is not determinative and it is also necessary to consider the purpose and content of the meeting.