Employers will often offer an employee a settlement when they want to terminate the employee’s contract on terms mutually agreed to ensure that there is a clean break. Additionally, employers will offer a settlement when the employee has raised issues about discrimination or have raised a grievance. This allows the employer to circumvent a claim for constructive dismissal or discrimination. Employers will make this offers without prejudice to prevent the offers being used as evidence against them. The general rule on without prejudice employment offers is that they are privileged as long as there was an existing dispute at the time the offer was made and the communication is a genuine attempt to settle the dispute. The Employment Appeal Tribunal has recently heard two cases based on settlements being offered after grievances were raised. These case had to opposing outcome which serve as a great explanation for how the general rule is applied by the Employment Tribunal.
Mrs S Garrod v Riverstone Management Ltd  EAT 177
In this case, a without prejudice settlement offer was made to the employee when she raised a grievance after returning from maternity leave. The Claimant then tried to use the without prejudice settlement offer to support her argument and argued that it was not privileged.
The Employment Appeals Tribunal referred to the decision from the similar case of BNP Paribas v Mezzotero  UKEAT 0218_04_3003 (30 March 2004). In this case, the claimant raised a grievance against her employer relating to being discouraged from returning from maternity leave. As such, her employer invited her to a meeting where an settlement offer was made. The Claimant brought a claim alleging that the company’s attempts to terminate her employment at this meeting amounted to discrimination and victimisation. The Employment Appeals Tribunal upheld the claimants arguments.
These cases were distinguished from each other because Ms Mezzotero’s discrimination and victimisation occurred at the meeting. Therefore, Ms Mezzetero’s case started at the meeting and could not have been in the employers contemplation. However, Mrs Garrod was using the without prejudice offer as evidence and so the general rule applied.
Scheldebouw B.V v Mr Martin Evanson  EAT 157.
In this case, Mr Evanson was claiming for unlawful deduction of wages following an agreement to terminate his employment. The Claimant argued that there was no dispute at the time the offer was made and so the offer was not protected by privilege. In deciding whether there was a dispute at the material time, The Employment Appeal Tribunal considered whether in the course of the negotiations, the parties might have reasonably contemplated litigation. The Employment Appeal Tribunal agreed that since there was no hostility around Mr Evanson’s termination, the employer had no reason to contemplate litigation. The Employment Appeals Tribunal held that the offer was not privileged.
These cases show how the general rule on without prejudice offers is applied by the Employment Tribunal. They also highlight the need to pay careful attention to the circumstances around which the without prejudice offer is made, to ensure that their offer will be privileged and not instigating a claim.
One possible solution to this uncertainty is to utilise section 111A of the Employment Rights Act 1996. This allows employers to have “off the record” conversations with employees. However, this section on prevents claims for unfair dismissal.
For further information on this topic or on any other legal area, please contact John Szepietowski or Kay Stewart at Audley Chaucer Solicitors on 01372 303444 or email firstname.lastname@example.org or visit our Linkedin page at https://www.linkedin.com/company/audley-chaucer-solicitors/
This information is correct as of March 2023.