Protected conversations – how 'protected' are they?
Since 29 July 2013 S.111A of the Employment Rights Act 1996 has made "protected conversations" (more precisely "pre-termination negotiations") inadmissible in unfair dismissal claims. S111A was introduced to address some gaps in the "without prejudice" rule and perceived concerns that employers were afraid of raising exit package options with employees for fear of claims that any subsequent dismissals were predetermined and therefore unfair.
In Faithorn Farrell Timms LLP v Bailey, the EAT has given the first appellate court guidance on the scope of S.111A. The EAT held that S.111A inadmissibility extends to the fact that negotiations have taken place, not just to the content of those negotiations, and that, unlike 'without prejudice' labelled discussions, S.111A privilege cannot be waived.
Ms Bailey was employed by FFT as office secretary from March 2009 until she resigned on 26 February 2015. Before she left she initiated discussions about a settlement agreement. In January, she and FFT exchanged 'without prejudice' correspondence discussing settlement terms, among other things; but towards the end of January, Ms Bailey sent a letter raising a grievance in which she referred to the previous discussions 'in open correspondence'. When FFT replied in a further 'without prejudice' letter, Ms Bailey responded to say that she did not accept that the discussion was privileged. When Ms Bailey then went on to bring claims of unfair constructive dismissal and sex discrimination, she referred to the settlement discussions in her particulars of claim. FFT did not object and also cited the same material in support of its own case. However, the question of admissibility was later raised at the Tribunal hearing.
An Employment Tribunal found that the documents were not rendered wholly inadmissible. On S.111A, it said the exclusion only covers the details of any settlement offer made or discussions held and not the simple fact that there had been such offers or discussions. As to 'without prejudice', it ruled that the detail of the offer made by FFT to Ms Bailey was privileged but that correspondence merely setting out the parties' positions was not. Both parties appealed to the EAT. FFT argued that the Tribunal should have found that all of the correspondence was covered by the 'without prejudice' rule. Ms Bailey argued that any 'without prejudice' privilege had been waived by FFT referring to such in their own open correspondence.
The EAT held that the Tribunal was wrong to find that S.111A applies only to the content of offers made or discussions held. The mere fact that there have been such offers or discussions is also inadmissible and so a claimant cannot rely on the existence of such negotiations in support of an unfair dismissal claim. It went on to find that S.111A renders inadmissible not just the relevant discussions between an employer and employee but also discussions within the employer, such as between different managers or between a manager and an HR adviser. The EAT noted that it is common for discussions to be reported back to higher management or HR and it would run counter to the purpose of S.111A if evidence of those reports were admissible. The EAT also found that privilege under S.111A cannot be waived so as to admit evidence which would otherwise be excluded by operation of S.111A. The EAT noted that Parliament had not chosen to import the common law 'without prejudice' rules into S.111A ERA and so the provision had to be read as a new provision and not as connected to or borne out of the "without prejudice" principle. The EAT also considered the scope of S.111A(4), which reduces or removes the privilege where there has been 'improper behaviour'. It ruled that the provision allowed a tribunal to take a broad approach to what might constitute such behaviour and could go beyond a similar but narrower principle based on the without prejudice rule.
In the Bailey case, the EAT found that while the Tribunal had made no error of law in finding that some of the correspondence passing between the parties was privileged under the 'without prejudice' rule, it had failed to consider whether FFT had waived that privilege. In the EAT's view, FFT's failure to complain about Ms Bailey 's reference to this material in her claim to the Tribunal, and its reliance on the same material in responding to the claim, indicated that it had waived privilege, so permitting such evidence to be presented. However it also found that the Tribunal had incorrectly concluded that S.111A privilege could also be waived, which the EAT said it could not.
So what practical points can employers take away?
It is clear that the "without prejudice" rule and S.111A privilege each have benefits and limitations, and now we are somewhat clearer about the scope of application of S.111A privilege.
Protected conversations can be used where there is no pre-existing dispute, perhaps where there has been a developing frustration with an employee, or an unspoken sense they are unable to do the job, and under the protection of S.111A a frank discussion can be held about the basis on which the employment might be brought to an agreed conclusion. The mere fact that such negotiations have taken place cannot be referenced in the Tribunal where it is hearing a claim of ordinary unfair dismissal. Even if, as in this case, an employer mistakenly refers to protected conversations in open correspondence or in their ET3, the S.111A privilege is not lost.
However, claims of unfair dismissal based on the exercise of family friendly rights, whistleblowing, health and safety, working time and the National Minimum Wage can still reference protected conversations where relevant to a claim of automatically unfair dismissal.
Where a dispute has developed between an employer and employee, such as where a grievance is raised asserting discrimination or about one of the matters that could give rise to an automatically unfair dismissal, discussions about settling their claim to include the employee leaving the employer can be raised under the "without prejudice" rule and should not in most cases be capable of being introduced into evidence at a Tribunal if such negotiations ultimately fail.
Protected conversations are not obviously a universal panacea but they are in conjunction with the without prejudice rule a method for securing a more swift and so often a more commercially acceptable resolution to an irreparable employee relations issue.
In some situations an "open offer" may, however, make more strategic sense than a protected conversation or without prejudice discussion.
It is usually best to seek advice before starting discussions about exit packages with employees to establish which approach is likely to be best, especially if discussions do not go to plan.