Employment Law: EAT ruling on employee settlement negotiations

Until now, case law regarding the inadmissibility of pre-termination negotiations has been absent, however in the recent case of Faithorn Farrell Timms LLP v Bailey the Employment Appeal Tribunal has ruled on the inadmissibility of settlement negotiations under the S.111A Employment Rights Act. 

In the case, B was employed as an Office Secretary by FFT (a firm of surveyors) from March 2009 until her resignation in February 2015. Before leaving, B initiated discussions about a settlement agreement and FFT exchanged ‘without prejudice’ correspondence discussing potential settlement terms. The ‘without prejudice’ rule generally prevents statements made in a genuine attempt to settle an existing dispute from being put before the court as evidence of admissions against the party which made them. 

At the end of January, B sent a letter to FFT raising a grievance in which she referred to the previous discussions as ‘open correspondence’. FFT replied to confirm previous discussions were privileged and B responded that she did not accept this. B went on to bring claims of unfair constructive dismissal and sex discrimination and specifically referred to the settlement discussions in her particulars of claim. FFT also cited the same material in support of their own case. 

The employment tribunal held that the documents were not entirely inadmissible. It gave the view that S.111A ERA and ‘without prejudice’ covers only the details of the discussions held and not the fact they have taken place or correspondence setting out the parties’ positions. 

FFT appealed to the EAT, arguing that the tribunal’s approach was too restrictive to S.111A ERA and that all of the correspondence was covered by the ‘without prejudice’ rule. B cross-appealed, arguing that any ‘without prejudice’ privilege had been waived by FFT’s failure to object and reliance on the same material in response to B’s ET1. 

The EAT held that S.111A inadmissibility covers not only the content of negotiations but also extends to the fact that negotiations have taken place. The EAT also ruled that S.111A privilege cannot be waived. 

For employers, it is important to note that without prejudice pre-termination negotiations or “protected conversations” can be very useful tools when used correctly, however it should be remembered that, following the guidance of the EAT, s.111A applies not only to the content of settlement negotiations but also to the fact they have taken place and that privilege cannot be waived by employer or employee. 

Katie Bowen Nicholas, Employment Law Solicitor, can provide in depth advice in all areas of Employment Law including contracts, consultancy agreements, unfair dismissal and discrimination claims as well as representation at Employment Tribunals. If you would like to discuss any aspect of Employment Law please call Katie on 01733 295 672 or by email at katie.bowennicholas@hegarty.co.uk.