In July 2013 a new provision, s111A, was inserted into the Employment Rights Act. This introduced the concept of “protected conversations” or “pre-termination negotiations” whereby any evidence about settlement discussions would be inadmissible in any subsequent claim for ordinary unfair dismissal unless the employer was guilty of “improper behaviour”. This was aimed at encouraging settlement and addressing the difficulty with common law “without prejudice” privilege which applies only once there is “a dispute” between the parties.

In Fairthorn Farrell Timms LLP v Bailey the EAT has given the first decision on the scope of s111A. Ms Bailey initiated settlement discussions following which there was correspondence between her solicitors (which were marked “without prejudice”) and her employer (which were not). Settlement was not reached and she brought a grievance followed by a tribunal claim for constructive dismissal and sex discrimination. She referred to the settlement discussions and the “without prejudice” correspondence in her grievance and her ET1. FTT did not object to this and in fact referred to the same material in its response. However, it subsequently raised the issue of admissibility at a preliminary hearing. The tribunal concluded that s111A only restricted details of the offer made from being disclosed and that it did not mean that details and documents were wholly inadmissible. The employer appealed.

The EAT made the following findings:

  • Privilege under s111A covers the fact that pre-termination discussions have taken place as well as details of any offers made. This is different to the common law “without prejudice” position where the fact of discussions can be referred to. It confirmed this type of privilege extends to the employer’s internal discussions, for example, those between HR and different managers.
  • Where there is another type of claim (apart from unfair dismissal) evidence about the pre-termination discussions will be admissible for that claim (in this case the sex discrimination) but will be inadmissible for the unfair dismissal claim.
  • The fact that Ms Bailey had referred to the without prejudice correspondence in her claim and her employer had not objected and had referred to the same material indicated that both parties had impliedly waived common law privilege. However, it is not possible for the parties to agree to waive privilege under s111A.
  • The EAT considered that what amounts to “improper behaviour” is wider than “unambiguous impropriety” under the common law exception and allowed for a potentially broader approach and a greater degree of flexibility for the tribunal.

The case was remitted to the tribunal to decide whether there was improper behaviour and whether s111A was properly engaged in circumstances where the claimant was alleging that the employer was not genuinely negotiating to resolve the dispute.

Practical points

  • This is the first EAT decision on the scope of s111A and how it interacts with the common law “without prejudice” rule.
  • It is helpful to the employer that the fact of the discussions is covered by s111A as well as the content. This is wider than the common law “without prejudice” rule and means that in a straightforward ordinary unfair dismissal claim the claimant cannot rely on the existence of settlement discussions to support a claim of unfair dismissal.
  • The decision indicates how useful s111A is in ensuring that where there is no dispute, initiating settlement discussions does not put a party at risk of them being referred to in an ordinary unfair dismissal tribunal claim.
  • It remains to be seen how widely “improper behaviour” will be interpreted by the tribunals. Employers should take care not to put any pressure on employees to accept offers as this may be construed as “improper behaviour”.
  • The EAT’s comments on how admissibility of settlement discussions would be treated for different types of claims heard by the same tribunal are likely to be difficult to operate in practice. This shows how important it is for employers to ensure, if at all possible, that where there are likely to be other types of claim, e.g. discrimination or whistleblowing, any discussions are also covered by the “without prejudice” rule which would cover everything. However, the difficulty with this is the need for the existence of a dispute. Employers may wish to consider seeking legal advice before embarking on any discussions to ensure their position is protected.