When can a termination discussion be without prejudice?

The Employment Appeal Tribunal (EAT) has provided some helpful clarity over when a “dispute” exists between an employer and employee, allowing the employer to put forward settlement terms on a confidential without prejudice (off the record) basis. Importantly, the EAT has confirmed that the Mezzotero case does not mean that a grievance is never enough to create a dispute, that proposing termination is permissible even if the employee wants to keep their job, and that the protection of the without prejudice rule is only lost in the clearest of cases of unambiguous impropriety.

Background: need for an existing dispute

Employers often want to have “off the record” conversations with employees to initiate termination or settlement discussions. Asking for a conversation to be “off the record” holds no legal value. The only way in which such conversations can be prevented from being used as evidence in a court or tribunal is by utilising the “without prejudice” rule. The without prejudice rule only applies, however, if:

• there is an existing dispute at the time the statements were made, and

• discussions are a genuine attempt to settle an existing dispute.

The case of BNP Paribas v Mezzotero is often cited for the proposition that the simple act of an employee raising a grievance does not by itself mean that there is a “dispute”.

There are some exceptions to the without prejudice rule, including that it cannot be used to hide extremely inappropriate behaviour, known as “unambiguous impropriety”, for example blackmail.

It is also possible under section 111A of the Employment Rights Act 1996 to have a pre-termination discussion about terminating an employment relationship on agreed terms without those discussions being used in subsequent proceedings even if there is no existing dispute. This rule applies to claims of unfair dismissal only, and not other claims, for example discrimination or whistleblowing. This case was not based on s111A pre-termination discussions.

For more information, see our inbrief guide to protected and without prejudice conversations.

What happened in this case: employer proposes agreed departure in a meeting to discuss a maternity-related grievance

The claimant, Mrs Garrod, was the Company Secretary. She had a law degree and had completed some legal training. She returned from maternity leave in July 2019, and in October 2019 informed her manager that she was pregnant again. She then submitted a grievance against three senior managers complaining of mistreatment, pregnancy and maternity discrimination (including bullying), harassment by her manager and a breach of her legal rights. Her grievance referred to Acas meditation and early conciliation (a step that has to be taken before making a tribunal claim).

Mrs Garrod was invited to a meeting with a HR adviser and was allowed to bring a legal adviser if she wished. In the meeting, the main points of the grievance and what she wanted out of it were discussed. She was asked if she would like to have a without prejudice conversation. The HR adviser assumed Mrs Garrod understood the meaning of this, and Mrs Garrod did not ask what it meant. The HR adviser described the employment relationship as fractured and problematic and said that the company would like to make an offer to terminate employment, mentioning a sum of £80,000.

The grievance was investigated and not upheld. No agreement was reached and Mrs Garrod brought claims for maternity discrimination and constructive unfair dismissal, among other things. In her claim form, Mrs Garrod mentioned what the HR adviser had said in the meeting about the offer to terminate her employment. The company applied to have this reference removed on the basis that it was protected by the without prejudice rule. At a preliminary hearing, the tribunal found for the company. Mrs Garrod appealed.

Employment Appeal Tribunal confirms the proposal was made on a without prejudice basis and could not be used in evidence

Mrs Garrod tried to rely on the Mezzotero case, arguing that it was well established that grievances are not sufficient to constitute an existing dispute. The Mezzotero case also involved an employee who raised a grievance after returning from maternity leave. In that case, the employee complained that she had been discouraged from returning. Her employer’s response was to invite her to a “without prejudice” meeting and suggest that termination of employment was best for all parties – something which the employee later claimed was victimising and discriminating against her for complaining. The EAT in Mezzotero noted that excluding evidence about the meeting would prevent the tribunal from considering that part of the employee’s claim and agreed that the tribunal was allowed to hear evidence about it, since there was a lack of dispute or genuine attempt at settlement of that dispute and the employer was abusing the without prejudice rule.

The EAT in this case drew a distinction between the Mezzotero case and that of Mrs Garrod:

• Unlike the tribunal claim in Mezzotero, Mrs Garrod’s tribunal claim was not actually based on what happened at the without prejudice meeting.

• In Mezzotero, the EAT did not rule that, as a matter of law, there could never have been a dispute on the facts of that case. It was a more limited ruling that the tribunal (which had only looked at the documents) could potentially conclude that there was no dispute or genuine attempt at reaching settlement in the circumstances.

• In the present case, the tribunal was entitled to conclude that there was an existing dispute by the time of the meeting in which an agreed departure was suggested. The content of Mrs Garrod’s grievance was very similar to the tribunal claim she subsequently issued. The references to legal rights, Acas and early conciliation also signposted the possibility of litigation. Weight was placed on Mrs Garrod’s legal training which signalled that such signposts were genuine.

• The fact that the grievance made clear that Mrs Garrod wanted to remain in her role did not impact this decision. Proposing termination is neither unusual nor impermissible when attempting to settle a dispute.

Mrs Garrod also claimed that the company tried to use the without prejudice rule to push her out of the business and that the HR adviser’s manner had been intimidating and aggressive, but the tribunal found this not to be the case. The EAT confirmed that the without prejudice rule can only be disapplied in “the very clearest of cases” or in “truly exceptional and needy circumstances”, neither of which applied here. The fact that the company suggested termination was not sufficient to show they acted with unambiguous impropriety.

The EAT made clear that the purpose of the without prejudice rule is to encourage settlement, and this outweighs the competing aim of ensuring all relevant material is before the courts. Therefore, the rule can only be displaced by very clear and serious wrongdoing – which was not found to exist here.

Implications for employers

This case confirms some helpful points for employers:

• A grievance can count as a “dispute” and be used to initiate without prejudice discussions.

• Employers can raise the issue of termination in without prejudice discussions in the context of grievances where the employee has not raised a desire to leave.

• Only in extreme cases of wrongdoing will the without prejudice rule be gazumped – demonstrating that the courts still favour the policy objective of encouraging parties to settle by protecting this rule.

The case does not, however, provide carte blanche for employers to propose termination of employment on a without prejudice basis:

• Not all grievances will put the parties in dispute. It will depend on the contents of the grievance. Significant here was that Acas, early conciliation, and legal claims were mentioned in the grievance, and the employee had some legal skills and knowledge. A more generic or less strident grievance submitted by an employee without such legal skills may fall short of the mark.

• Other circumstances, such as a performance improvement plan initiated by an employer, may also fall short of an “existing dispute”.

• One of the reasons why Mrs Garrod could not reference the termination offer was that she was not making a specific tribunal claim about it. She was referring to the termination offer to bolster her case that the employer had behaved unlawfully up to that point, rather than claiming that making the offer was another example of the employer’s discriminatory behaviour. There is still the risk that the without prejudice rule is displaced because the claims that a claimant later decides to bring are based on the without prejudice meeting and what happened in it.

For those reasons, employers should still remain cautious about when and how they initiate without prejudice conversations and what is said in any early purported without prejudice discussions, in case it later ends up in front of a tribunal. Nonetheless, this is a helpful ruling for employers which confirms that Mezzotero was fact-specific and will not present a barrier on all cases.

Mrs S Garrod v Riverstone Management Limited - judgment available here.