Failing to ensure that all of the legal requirements for “without prejudice” conversations with staff are met can create a risk that the discussions will not be considered genuinely “without prejudice”. Naomi Flynn tells us how to speak “off the record” and provides useful tips.
Who: Employers/Employees
When: May 2008
Where: UK
Law stated as at: 20th May 2008
What happens:
If it is done properly, managing difficult or poorly performing employees out of a business can be a lengthy and costly process for an employer. If it is not done properly however consequences can be severe, including substantial compensation payments and serious damage to the employer's reputation (particularly with discrimination claims).
Having a conversation on a "without prejudice" basis can offer a solution this problem, as the general rule is that any comments made during "without prejudice" discussions will not be admissible in subsequent open correspondence or court proceedings. This means that an employer can offer the employee an exit package without the risk of a claim resulting from such a discussion.
However what many employers don't realise is that by failing to ensure that all of the legal requirements for "without prejudice" conversations are met, there is a risk that the discussions will not genuinely be considered to be "without prejudice". If this occurs, the conversations can be relied on by employees in subsequent Employment Tribunal proceedings. This can be particularly damaging when the employer offers a sum of money to the employee. In these circumstances this offer may be disclosed to the Tribunal and this may lead the Tribunal to conclude that the employer believed the employee's claims to be well founded.
How to speak off the record
So how can employers avoid this pitfall? Current case law suggests:
1. There must be a real dispute in existence and any without prejudice discussions must be a genuine attempt to resolve the dispute. The question is whether the parties contemplated or might reasonably have contemplated litigation if they could not resolve the dispute.
Case law suggests that there must be something more than a grievance to give rise to a "dispute" (BNP Paribas v Mezzotero). Although the situation will differ depending on the circumstances, it is only really safe for an employer to assume there is such a dispute when notice of termination of employment has been given or litigation has been threatened.
It is therefore important that when dealing with difficult employees, employers follow the correct legal process on an "open" basis, at least up to the point of commencing without prejudice discussions (although in reality many employers do take a commercial risk here and start the discussions earlier).
2. Ideally the employee should have given his/her informed and considered agreement to enter into discussions on a without prejudice basis.
3. There must be no "unambiguous impropriety" in the discussions. This is to prevent the parties abusing the "without prejudice" protection. By way of example, any discriminatory comments made during the discussions will be deemed as on the record. This will also be the case for blackmail and perjury (e.g. comments made by a future witness saying that he will give particular evidence at the trial which is untrue).
Practical Tips
When having a without prejudice discussion employers should ensure that:
- there is an existing dispute between the parties. In order to be legally protected employers should ensure that they follow the correct procedures on an open basis at least until there is a dispute. Employers should bear in mind that the more complete the open procedures, the greater the likelihood of them paying a lower settlement to the employee;
- it is made clear to the employee at the start of the discussion that the discussion will be on a "without prejudice" basis. Confirm that the consequence of this is that the discussions that follows cannot be referred to in any subsequent "open" correspondence or as evidence in any court or tribunal i.e. the employee cannot disclose discussions to anyone (other than his/her legal adviser);
- obtain the employee's agreement to speak on this basis before commencing settlement negotiations;
- ensure that no admissions of guilt or discriminatory comments are made on the employer's side during the discussions. Try to steer away from the detail of the underlying dispute and make it clear that no concessions are made. Focus instead on the settlement negotiations;
- when negotiating a compromise agreement correspondence should be marked "without prejudice and subject to contract"; and
- if in doubt take legal advice.
