The Employment Appeal Tribunal (EAT) has provided some welcome clarification on the application of section 111A Employment Rights Act 1996.

Introduced in July 2013, this section provides that pre-termination negotiations are inadmissible in unfair dismissal cases.

In our previous article, 'How to have an 'off the record' conversation with an employee', we considered the key issues for employers to be aware of before holding an 'off the record' conversation with an employee.

The recent case of Faithorn Farrell Timms LLP v Bailey UKEAT/0025/16 the EAT gave guidance on the status of confidential discussions held under the scope of section 111A.

The background

Section 111A provides that confidential discussions regarding ending the employment relationship are privileged and inadmissible as evidence in any subsequent employment tribunal proceedings for unfair dismissal (with the exception of automatically unfair dismissal claims).

Section 111A privilege does not apply to other types of claim such as discrimination.

Unlike the common law, 'without prejudice' rule, this statutory cloak of confidentiality applies even where there is no existing dispute between the parties.

Facts of the case

Mrs Bailey, was employed part-time by Faithorn Farrell Timms LLP (FFT). Towards the end of 2014 FFT indicated to Mrs Bailey that she would not be able to retain her part-time hours. Mrs Bailey entered into settlement discussions with FFT in December 2014. Unfortunately, the discussions did not go well and by 7 January 2015 the parties were in dispute.

Mrs Bailey's representative wrote a without prejudice letter to FFT in which they referenced the settlement discussions and the offer. FFT replied in an open letter setting out their position (making only a minor reference to the settlement discussions). This next series of letters followed the same pattern with Mrs Bailey's representative writing a without prejudice letter to FFT and FFT replying on an open basis.

On 26 January 2015 Mrs Bailey raised a grievance. In her grievance she stated that she was relying on her without prejudice letters of 7 and 19 January. When responding to the grievance FFT did not tell Mrs Bailey that she should not rely on without prejudice conversations.

One month later, on 26 February 2015, Mrs Bailey resigned and on 6 May 2015 brought claims of constructive unfair dismissal and sex discrimination.

In her particulars of claim Mrs Bailey referred to the initial settlement discussions, the without prejudice letters and internal discussions regarding the settlement between the HR Managers and senior employees (these had been obtained via a subject access request).

FFT didn't object to the reference to the without prejudice letters and discussions in its ET3; however, at a later preliminary hearing FFT raised the issue of admissibility of the documents and conversations.

The Employment tribunal's decision

An employment tribunal considered that section 111A only restricted the details of the offer that was made from being disclosed, not the fact that such discussions had taken place. It held therefore that the documents in issue were neither rendered wholly inadmissible by section 111A, nor by the common law without prejudice principles.

Arguments in the Employment Appeal Tribunal

FFT appealed arguing that the tribunal had failed to distinguish between the two claims of constructive unfair dismissal and sex discrimination for the purpose of the section 111A privilege and the common law without prejudice privilege. In addition, they appealed the finding that only the terms of the offer were protected and not the fact of the settlement discussions and related correspondence.

Mrs Bailey cross appealed alleging that FFT had made no genuine attempt to resolve the dispute and, therefore the discussions could not properly be said to be privileged. In addition, FFT had waived privilege as she referred to the documents on an open basis in her ET1 and grievance and this was not disputed by FFT.

Finally, she argued the tribunal had erred in failing to address the issue of whether FFT's actions during the negotiations amounted to unambiguous impropriety and/or improper behaviour meaning that the discussions were admissible under both the without prejudice rule and section 111A(4) of the ERA.

Guidance from the Employment Appeal Tribunal

The EAT held that:

. section 111A protects not just the detail of the offer but also the fact that the pre-termination discussions have taken place and this extends to any discussions held with a view to terminating the employment on agreed terms.
. Internal conversations between different managers and HR are also protected as it is only right that these conversations would be had internally and form part of the general discussions.
. The tribunal should have separated out the claims so that information not protected by section 111A could have been heard in relation to the sex discrimination claims.
. Privilege is removed where improper behaviour is found. However, Parliament had deliberately distinguished the test of unambiguous impropriety, the exception to the without prejudice rule, to the approach set out in the ERA which allows tribunals to adopt a much broader approach. If Parliament had wanted to follow the common law rule they simply would have done so within the legislation.
. If no improper behaviour is established then section 111A privilege cannot be waived, unlike without prejudice privilege which can be waived by the parties.

Unfortunately, the EAT declined to rule on and remitted the question of whether section 111A applied where there was no settlement offer made by the employer.

What does this case mean for employers?

The case illustrates how complex the interface with the without prejudice rule can be, particularly in a case where an employee has various potential claims, not just one for unfair dismissal.

As it is now clear that section 111A privilege cannot be waived, so it is important for employers to continue open correspondence with the employee during any period of negotiations covered by section 111A if they want this information 'on record'. The open correspondence allows the employer to demonstrate ongoing communication and explain any apparent delay in any future litigation.


This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.