For the ‘without prejudice’ rule to apply, there must be an existing dispute.
The EAT has recently reaffirmed this in the case of Portnykh v Nomura International plc. It held that negotiations between an employer and employee as to the terms of a settlement agreement following announcing to the employee that it intended to dismiss them, was clear evidence that there was either a present dispute or the potential for a future dispute. The ‘without prejudice’ rule was therefore held to apply so as to make the evidence inadmissible in the employees subsequent unfair dismissal claim.
Portnykh (P) brought a claim for automatic unfair dismissal for having made protected disclosures. P argued that he was never given a reasonable explanation for his dismissal. Nomura International plc (NI) argued that they had told him the reason for his dismissal was misconduct. However, they had agreed, at P’s request, to say that the reason for the termination of P’s employment was resignation conditional upon him entering into a settlement agreement. The parties subsequently engaged in correspondence on a ‘without prejudice’ basis, leading to a draft settlement agreement being drawn up.
During proceedings NI sought to rely on the existence of the draft settlement agreement and correspondence as evidence to support their case. P argued that this correspondence and documentation was inadmissible as it was ‘without prejudice’.
The tribunal found that the ‘without prejudice’ rule did not apply because there was no dispute at the time the parties entered into the correspondence. Further, even if the rule did apply, P could not seek to exclude evidence which showed that he had asked his employer for his dismissal to be deemed to be a resignation, rather than misconduct. The tribunal therefore concluded that this would amount to ‘unambiguous impropriety’, and would therefore form one of the exceptions to the ‘without prejudice’ rule.
P appealed to the EAT.
The EAT allowed the appeal and held that the fact that P had been told by NI that they would be terminating his employment because of misconduct, there was evidence that there was either a dispute at that time, or the potential for a dispute. The ‘without prejudice’ rule therefore applied.
The EAT also overturned the tribunal’s decision that the ‘unambiguous impropriety’ exception applied and stated that the tribunal had not appreciated how limited the concept was and that it meant something far more than merely being disadvantaged by the exclusion of evidence.
Although the employer lost in this case, the decision is helpful for employers wanting to use ‘without prejudice’ discussions as the tribunal took a rather liberal approach as to when a dispute is in existence for the purposes of relying on the ‘without prejudice’ rule. The judge pointed out that the negotiations in question will often relate to a dispute.
Further, from 29 July 2013, if there is no existing dispute, employers can rely on the concept of ‘protected conversations’ to discuss and negotiate an agreed termination where the relationship with an employee is not working. However the protection afforded by this is limited as it only applies to subsequent claims for ordinary unfair dismissal – it does not apply to any other claims including constructive dismissal.
It is always advisable to plan and handle any ‘protected conversations’ or ‘without prejudice’ discussions very carefully. If you would like any further guidance on their use then please contact a member of the employment team.