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"On or off the record" - the without prejudice rule
By Shazia Ali-Webber, Mills & Reeve LLP
The ‘without prejudice’ meeting is heavily relied upon by managers, Human Resource professionals and others when attempting to deal with a difficult employee. Often these meetings are designed to test the water, to see if the employee will leave rather than have to be taken through a potentially destructive dismissal procedure. They are a short cut to termination, often by way of settlement. But how far does the ‘without prejudice’ rule allow an employer to go?
If ‘without prejudice’ genuinely applies, nothing that is said or written in the meeting can be referred to if the subject matter of the dispute subsequently reaches court, unless both parties agree otherwise. Concessions and admissions can therefore be made at meetings or in correspondence headed ‘without prejudice’ which a party might not otherwise make for fear of it being regurgitated at court. These admissions can be pivotal in assisting the parties to settle their differences through ‘full and frank’ discussions.
But tribunals and courts have recently been grappling with the question of the extent to which the without prejudice rule should apply to negotiations conducted between employer and employee, typically in an attempt to reach agreement on a settlement package as an alternative to dismissal. This has recently been considered by the Court of Appeal in two cases: Framlington Group Limited and Axa Framlington Group Limited v Barnetson [2007] and Brunel University & another v Vaseghi & Webster [2007].
The first and most obvious point to make is that there must be a genuine dispute between the parties as a pre-condition of the ‘without prejudice’ rule applying. That point was illustrated in BNP Paribas v Mezzotero [2004], a case involving a senior banking executive, Ms Mezzotero, who raised a grievance about her treatment following her return from maternity leave. Ms Mezzotero alleged that she has not been allowed to return to her old job. She was subsequently called to a grievance meeting with her managers who said that they wanted to speak to her on a ‘without prejudice’ basis. At the meeting, her managers suggested that she terminate her job by mutual agreement on the bank's standard redundancy terms, including a payment of approximately £100,000, collect her belongings, leave and seek legal advice.
Ms Mezzotero subsequently lodged a claim at the Employment Tribunal and referred to the ‘without prejudice’ discussions. The bank argued that she could not refer to this exchange as it was stated to be ‘without prejudice’. The Employment Appeal Tribunal ruled that Ms Mezzotero could use what the bank had said to her as evidence in support of her claim for sex discrimination, despite the fact that the bank had told her that it was making the offer on a ‘without prejudice’ basis.
The main reason for the EAT’s conclusion was that at the time of the meeting the parties were not actually in dispute, though the EAT’s obvious distaste for the bank’s behaviour may have influenced it too. It said that the mere fact that Ms Mezzotero had lodged a grievance did not necessarily mean that there was a dispute between the parties. However the fact that the offer was made a considerable time before Employment Tribunal proceedings were issued by Ms Mezzotero was not an obstacle to a Tribunal finding that there had been a dispute, although this was not the conclusion in this case.
A recent Court of Appeal decision involving another employee in the City confirms the EAT’s observation in Mezzotero. In Framlington Group Limited and Axa Framlington Group Limited v Barnetson [2007] Mr Barnetson was Chief Operating Officer on a fixed term contract at a fund management company, Framlington. An offer of employment was made to Mr Barnetson verbally with a view to terms being reduced to writing later. After starting his employment, Mr Barnetson requested written terms of employment.
The contract produced by Framlington did not reflect what Mr Barnetson thought they had agreed verbally but after some negotiation he signed a version of the contract, whilst protesting that the verbal offer had not been honoured. Over the next few months, the relationship became strained and Framlington informed Mr Barnetson that he was to be dismissed and invited him to discuss a termination agreement. These discussions broke down when Mr Barnetson threatened proceedings against Framlington. Framlington responded by dis-engaging from negotiations and dismissing Mr Barnetson. Mr Barnetson lodged breach of contract and wrongful dismissal claims at the Employment Tribunal referring to the contents of ‘without prejudice’ discussions. Framlington appealed against the inclusion of this information. The crux of the appeal was whether the ‘without prejudice’ rule applied to negotiations which occurred before proceedings were issued at a court or tribunal i.e. was there a dispute which the parties were trying to resolve?
The Court of Appeal held that the ‘without prejudice’ rule is designed to discourage parties from entering into litigation and to encourage settlement of disputes. Therefore to give the rule its full effect it should apply irrespective of whether either party has lodged a claim. The court held that litigation was in the contemplation of the parties when ‘without prejudice’ discussions took place, therefore there was a ‘dispute’ and the protection of the rule is not lost months or even years before proceedings are issued.
Another recent Court of Appeal decision, this time involving university academics, illustrates a limitation of the rule: the protection of the rule can be lost or “waived” if what has been said is “opened” by one party, and the other party does not object.
In Brunel University & another v Vaseghi & Webster [2007] the University, following it’s successful defence of claims of race discrimination, published an article in its annual magazine saying that it would continue to uphold and defend the reputation of the University against unfounded allegations of race discrimination especially when accompanied by unwarranted demands for money. Professor Vaseghi and Ms Webster were convinced that the article was referring to claims they had made and they brought grievances against the University. The University set up a panel to hear the grievances and the panel, as part of its deliberations, considered evidence about the without prejudice settlement negotiations that had taken place during the original claims brought by Ms Webster and Professor Vaseghi. The University dismissed the grievances and the academics lodged claims at the Employment Tribunal. At the Tribunal both parties referred to the ‘without prejudice’ discussions that had taken place.
The Court of Appeal held that as both parties had pleaded their cases at Tribunal making explicit reference to the ‘without prejudice’ discussions and in the absence of an objection by either party, this was a clear demonstration of an intention to waive the privilege that attached to the ‘without prejudice’ discussions and they could be referred to in the Tribunal proceedings.
These cases illustrate that the timing of without prejudice discussions must be considered carefully and any subsequent references to them must also be well thought out. While there is no problem in initiating discussions before the contract of employment is terminated or claims are lodged, an employer should make sure that the negotiations are about resolving a genuine dispute. For that reason, it is probably better to conduct the discussions in the context of formal grievance or disciplinary process, particularly given the employer’s obligations under the Statutory Dispute Resolution procedures, or alternatively make sure that all ‘without prejudice’ discussions are ostensibly about resolving a dispute which should be identified at the outset. Furthermore, the temptation to refer to ‘without prejudice’ negotiations in normal dealings with the employee, however strong, must be resisted unless the employer is prepared for all that has been said to be revealed to the court.
Shazia Ali-Webber, Solicitor
shazia.ali-webber@mills-reeve.com
Tel: 020 7 6489254
The contents of this document are copyright © Mills & Reeve LLP. All rights reserved. This document contains general advice and comments only and therefore specific legal advice should be taken before reliance is placed upon it in any particular circumstances. Where hyperlinks are provided to third party websites, Mills & Reeve LLP is not responsible for the content of such sites.
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