In this case, the EAT gave its first judgment on the "protected conversation" regime.

The facts

In 2013, the government brought in legislation to help employers to have conversations with employees about the possibility of exiting under a settlement agreement without fear that the conversations will be used against them in unfair dismissal claims. This "protected conversation" regime exists alongside, and is different from, "without prejudice" protection, which can be problematic in the employment arena because the protection only kicks in if the parties are in dispute.

Mrs Bailey, a secretary with Faithorn Farrell LLP, initiated discussions about a settlement agreement. She exchanged "without prejudice" correspondence with her employer which, among other things, related to settlement terms. She also raised a grievance, which referred to the without prejudice conversations. She went on to claim constructive unfair dismissal and indirect sex discrimination, arising partly from Faithorn Farrell's conduct towards her during the settlement discussions. The tribunal had to decide whether the settlement conversations, and evidence relating to them, were protected by without prejudice privilege and/or by the protected conversation regime. The tribunal decided that the material was not protected, with the exception of any specific reference to any offer. Faithorn Farrell successfully appealed, and Mrs Bailey cross appealed. Her cross appeal was upheld in part.

In making its decision, the EAT, for the first time, had to consider a number of questions about the scope of the protected conversation regime, and the differences between it and without prejudice protection. In particular, the EAT held that the protection given by the protected conversation legislation:

  • cannot be waived, even if the parties agree to a waiver. This is distinct from without prejudice protection which can be waived with the consent of the parties.
  • does not just apply to the content of any offers made or discussions held. The fact that there have been such offers or discussions is also inadmissible, and a claimant cannot rely on the existence of such negotiations in support of an unfair dismissal claim.
  • also applies to discussions within the employer, such as between different managers or between a manager and an HR advisor.

The EAT also compared the circumstances under the two regimes under which privilege, or protection, will be lost. Employers and employees cannot benefit from the protection given by the protected conversation regime if there has been "improper behaviour". The EAT held that this is wider than the exception to the without prejudice rule, where privilege is removed if there is "unambiguous impropriety".

The EAT also held that the protected conversation regime is distinct from the without prejudice rule, and should not be viewed through the lens of without prejudice case law.

What does this mean for employers?

This case highlights a few useful lessons/reminders for employers.

  1. Employers often delay disciplinary or grievance procedures while they try to negotiate a settlement. Delays in following procedures can be used against employers in tribunal. Neither the employee nor the employer can refer to protected conversations in an unfair dismissal claim. Employers cannot, therefore, explain any delay by referring to the protected conversation. They need to protect their open position, and in some circumstances should continue open conversations concurrently with protected/without prejudice conversations.
  2. Still to be decided in this case is the question of whether the employer waived without prejudice protection by referring in the ET3 to the settlement discussions. It is possible to waive without prejudice conversations (in contrast to protected conversations) by conduct. Employers should be careful to keep open and without prejudice conversations separate, and not refer to without prejudice conversations in open correspondence.
  3. "Improper behaviour" is fairly wide, and includes putting the employee under undue time pressure to enter into the agreement and telling the employee that s/he will be dismissed if they do not enter into settlement. If an employer behaves improperly, the employee will be able to use the conversation as evidence that any subsequent behaviour was a sham, or to trigger a constructive dismissal claim.

Faithorn Farrell Timms LLP v Bailey