This article looks at some recent case law on the admissibility or otherwise in Employment Tribunal proceedings of without prejudice discussions.

Employment Tribunals ("ETs") are "not bound by any rule of law relating to the admissibility of evidence in proceedings before the courts"[1]. This affords them a wide discretion in relation to admissibility and exclusion of evidence. It is settled law, however, that they will not disregard well-established principles of law regarding the admissibility of evidence. It has been held[2] that, despite the absence of any express power, ETs have the same powers as a civil court[3] in terms of the exclusion of evidence that would otherwise be relevant and admissible.

It has been held, however, that the rule of evidence that "without prejudice" communications are privileged and inadmissible applies in ETs as it does in court proceedings[4]. The public policy which lies behind this rule is that it is desirable for parties to resolve their disputes by agreement rather than litigation, and the fear that what is said in negotiation may later be used against them inhibits this. The authorities have also relied upon the "express or implied agreement of the parties themselves that communications in the course of their negotiations should not be admissible in evidence"[5].

When will the rule apply? Existing authorities provide that the use (or non-use) by the parties of the express words "without prejudice" will not necessarily be decisive either way. However, the rule will generally apply where it is clear from the surrounding circumstances that the parties were seeking to compromise the action. In the employment context there is statutory protection of negotiations conducted through a conciliation officer, and negotiations entered into that with a view to entering into a compromise agreement will generally be privileged unless the parties clearly and unequivocally waive privilege[6].

Privilege will not apply unless, at the time the communication is made, there is an existing dispute between the parties and they are engaged in a genuine attempt to settle it[7]. Even where a party can establish both of those things, privilege may not necessary apply: a party must not abuse privilege. Examples of such abuse can include where a party uses without prejudice negotiations to "act as a cloak for perjury, blackmail or some other 'unambiguous impropriety'"[8] although these exceptions will be applied strictly and confined to cases of serious abuse. It is also possible for parties to be held to have waived privilege by their actions.

A couple of specific issues have arisen in employment cases. The first is whether privilege can apply to communications during negotiations which take place prior to the commencement of litigation. It will not be uncommon, for example, for parties to seek to negotiate a termination and compromise agreement during the course of internal grievance, redundancy or disciplinary hearings. It has been held that negotiations prior to the commencement of litigation can be subject to privilege[9]. However, this involves ETs in a fact-sensitive decision in each case as to whether the negotiations have sufficient proximity to the litigation to fall within the scope of privilege. The dividing line will not always be clear. Proximity will not just relate to timing or whether litigation has been threatened. The critical factors will include the subject-matter of the dispute and whether in the course of their negotiations the parties contemplated or might reasonably have contemplated litigation if they could not agree. Thus if the dispute arose over the employee's contractual entitlement on early dismissal, against the backdrop of the threat of litigation if the dispute could not be resolved, privilege would apply[10].

Where an employee presents a grievance, on the face of it there is a dispute with the employer, however that "dispute" is capable of being resolved by a satisfactory outcome to the grievance. Thus whilst communications arising during the grievance process may fall within the rule[11], it has held that the raising of a grievance will not in and of itself necessarily mean that the parties are in dispute[12]. It will be necessary to examine matters such as the nature of the grievance, the manner and circumstances in which it is raised, and the potential for it leading to litigation if not resolved. Thus where[13] an employee raises a grievance and the employer seeks to use the grievance process to engineer a discussion about consensual termination, that discussion will not be privileged if at the time it was entered into there was no genuine dispute about termination of employment. The reluctance to apply the privilege rule will be all the greater if the claimant is unrepresented and has no prior notice of what is to be discussed, so that the parties are not negotiating on an equal basis and the employer can be seen to be taking advantage of the employee[14].

Another particular problem which arises in employment cases relates to discrimination claims. Discrimination cases are notoriously difficult to prove, and analysis of whether or not there has been discrimination takes place on the basis of consideration in the light of the full facts. If an employee seeks to rely on a comment made during purportedly "without prejudice" communications as an example, or evidence, of discrimination - including victimisation, this presents something of a problem, particularly if the alleged comment falls short of clear evidence of discrimination and therefore does not amount to "unambiguous impropriety". However, it is not uncommon for employees to allege that as a result of them raising a grievance alleging discrimination, the employer makes it clear that they are no longer welcome by seeking to negotiate termination of employment. The courts have made it clear[15], however, that there is no special exemption for discrimination cases from the rule about privilege of "without prejudice" communications - the issue falls to be determined on the facts as in any other case.

The recent case of Portnykh v Nomura International plc [2014] IRLR 251, EAT, gives further guidance on some of the issues identified above about when privilege does and does not apply in relation to "without prejudice" communications.

The claimant alleged unfair dismissal by reason of him having made protected disclosures. The respondent alleged that he had been dismissed for misconduct. The respondent alleged that after it proposed to dismiss for misconduct, negotiations commenced and the claimant suggested that the reason for dismissal should be given as redundancy, to which the respondent agreed. The negotiations concerned an "ex gratia redundancy payment" conditional upon a compromise agreement being entered into. Those negotiations broke down, and the respondent contended that only then did the claimant suggest that he was dismissed as a result of making protected disclosures. The respondent sought to rely on the correspondence about the negotiations and draft compromise agreement; the claimant sought to exclude them on grounds of privilege. At first instance the material was ruled admissible. The EAT overturned that decision, holding that the evidence of what happened up to the point where the parties agreed to frame the dismissal as a redundancy was admissible, but the subsequent correspondence was not.

The EAT set out the principles to be drawn from earlier authorities and the public policy arguments. It reminded itself that for the exclusion to apply there did not need to be extant litigation, only an extant dispute where the parties are conscious of the potential for litigation. It held that the context and factual matrix which preceded the "without prejudice" correspondence in this case clearly indicated an actual or potential dispute. Although this will not automatically be the case whenever a compromise agreement is offered, it will be so where the employer announces an intention to dismiss and there are then discussions about an alternative manner of dismissal. It was further held that the correspondence itself showed that there was at least a potential dispute, and the parameters of that dispute (about money and the reason for termination).

The EAT also pointed out that the whole purpose of any compromise agreement would have been to compromise "and at the same time prevent [the claimant] from having access to an employment tribunal in order to litigate about his dismissal". However far advanced that process, and however amicable, "to have concluded that there had been no 'dispute' would have been to reject the process of negotiation as a species of dispute and, in effect, to require there to have been the existence of proceedings". It was not necessary to find some degree of objection to the course proposed or a degree of hostility to the other party as an essential ingredient for a 'dispute', still less a potential one.

The EAT declined to rule on the issue whether the "without prejudice" exclusion can apply in circumstances where there are 'negotiations' but no 'dispute' and considered that this was a difficult question best left to a case in which the issue was crucial. In this case, the negotiations were connected to a dispute and it could not be said that they were wholly unconnected with the issues in the case.  

The EAT also noted that the "unambiguous impropriety" exception should not be applied too readily. However significant the alleged without prejudice material is for the potential litigation, that significance alone, absent abuse of privilege, cannot result in it being released from the without prejudice exclusion. Prejudice to a party in litigation is not to be confused with the exceptional situation of unambiguous impropriety: the exclusion requires far more than a party being disadvantaged by the exclusion of evidence.

Clearly parties need to tread carefully when seeking to enter into "without prejudice" discussions before there is any formal dispute between them which can be said to be likely to lead to litigation. The mere labelling of the discussions as "without prejudice" will not be determinative of the matter and ETs will look at the relevant factual circumstances before, during and after the negotiations to determine whether or not the material should be included. Parties should be alive to this and should consider carefully what they wish to be in open discussion so that they can rely on it later, and what they wish to be protected, and whether it genuinely relates to an actual or threatened dispute which they anticipate may lead to litigation. If they wish to rely on the cloak of privilege, it is as well to state this expressly as early as possible. If either party wishes to rely on or exclude "without prejudice" material in subsequent proceedings, it is advisable to identify and resolve this as a preliminary issue in advance of any final hearing.