In Portnykh v Nomura International Plc UKEAT/2013/0448, the UK Employment Appeal Tribunal (EAT) has examined the scope of "without prejudice" privilege in the context of discussions aimed at agreeing the terms of an employee's exit from employment.

Nomura International Plc ("Nomura") announced an intention to dismiss its employee, Dr Portnykh, for misconduct. There then followed exchanges of correspondence marked "without prejudice" about the terms of a potential settlement agreement in which Nomura agreed to state that the reason for his dismissal was redundancy. The negotiations broke down and Dr Portnykh brought a claim in the Employment Tribunal contending that the real reason for his dismissal was that he had made protected disclosures (in other words, he had blown the whistle). At a preliminary hearing, the Tribunal allowed Nomura to refer at the full trial to the "without prejudice" correspondence which Nomura argued would show the real reason for the dismissal. 

The EAT held that looking at the factual matrix leading up to the correspondence, it was clear that at the time there had either been a dispute or the potential for a future dispute. Even without the factual matrix, it was clear from the correspondence itself that there had been at least a potential dispute. The EAT added that, although there would not necessarily be a dispute or potential dispute every time a settlement agreement was offered, there would often be. 

Although the decision went against the employer in this particular case, it does give some comfort to employers wanting to hold "without prejudice" termination negotiations before a dispute has actually arisen. It is still important, however, to handle such discussions carefully (ideally using a script) to minimise the risk of claims.