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From time to time we will post news articles and announcements relating to the firm and to various legal issues that may be of interest to you.

Admissibility of settlement discussions in court

Section 111A of the Employment Rights Act 1996 was introduced in 2013 and gives protection to the confidentiality of certain pre-termination negotiations. The section allows for “any offer made or discussions held” with a view to negotiating agreed terms for termination of an employee’s employment will not be admissible as evidence in a subsequent ordinary claim of unfair dismissal.

The privilege provided by section 111A is therefore more limited than that provided by ‘without prejudice’ discussions, the scope of which is wider. Without prejudice discussions can be used to resolve a much wider range of employment claims, not just unfair dismissal. The key differences between the two types of privilege are as follows:

  • ‘Without prejudice’ privilege only applies where there is an existing dispute between the parties and the negotiations are a genuine attempt to settle it. The fact that negotiations have taken place may be admissible, as may correspondence which sets out the parties’ positions.
  • Privilege under s.111A applies whether the parties have an existing dispute or not, and allows for confidential discussion regarding ending the employment relationship.
  • Without prejudice privilege can be waived with the consent of the parties, and may be waived by the court where there is improper conduct.
  • Privilege under s.111A can be waived by the court where there has been ‘improper behaviour’.

However, it has been unclear whether the protection afforded by s.111A covers the mere fact that negotiations took place, or whether it can be waived with the consent of the parties. The Employment Appeal Tribunal (EAT) has for the first time given guidance on the matter. In Faithorn Farrel Timms LLP v Bailey, the EAT had to consider whether ‘without prejudice’ letters were admissible, either in terms of s.111A or ordinary without prejudice rules, and whether privilege had been waived.

Ms Bailey was employed as an office secretary. Prior to resigning, discussions were had regarding a proposed settlement agreement and the terms were discussed via ‘without prejudice’ correspondence. Ms Bailey subsequently raised a grievance referring to the discussions and said she did not accept they were privileged. Ms Bailey claimed unfair constructive dismissal and sex discrimination, and referred to the settlement discussions in her claim. Faithorn did not object to this, and also mentioned the same material in its defence. At the tribunal hearing, the question was then raised as to admissibility.

When the case reached the EAT it considered the following issues:

  • Whether the mere fact that discussions had taken place was covered by the s.111A privilege
  • The extent to which discussions are covered
  • Whether privilege under s.111A could be waived as is the case with ‘without prejudice’ privilege.

In terms of these issues, it found that:

  • The mere fact that there have been settlement offers or discussions is covered by the s.111A privilege and is therefore inadmissible in subsequent proceedings. A Claimant therefore cannot rely on the existence of settlement negotiations in support of an unfair dismissal claim or even refer to the fact that they have taken place.
  • 111A means that discussions within the employer’s business are also inadmissible, such as discussions between managers and HR.
  • Privilege under s.111A cannot be waived. The EAT found that there is nothing in s.111A which reads as permitting the parties to agree to the admission of evidence. It did note that the exception in s.111A(4) which removes the privilege where there has been ‘improper behaviour’ is broad and gives flexibility for such evidence to be admitted where the tribunal believes there are grounds to.

This decision is likely to be of comfort to employers, who may be concerned that the fact that they approached an employee with a settlement offer will be used against them if that employee objects or discussions subsequently break down. However, it is worth remembering that s111A only applies to cases of unfair dismissal, including constructive dismissal, and not to other types of claim such as discrimination. In such cases, care should be taken to ensure that without prejudice privilege is invoked and maintained if it is intended to keep discussions confidential.

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