To what extent are 'protected conversations' protected?

Posted by Vicky Schollar on
Can employers and employees agree to refer to 'protected conversations' in Employment Tribunal (ET) proceedings? And does the statutory protection extend to the fact that discussions have taken place, or just the details of the offer/discussions? The Employment Appeal Tribunal (EAT) has addressed these issues in its first judgement on the scope of 'protected conversations' – or 'pre-termination negotiations' as they are called in section 111A of the Employment Rights Act 1996 (ERA).

Protected conversations were introduced in 2013. They were designed to enable employers and employees to have a confidential discussion about bringing employment to an end without fear of those discussions being revealed in ET proceedings. Previously discussions could be (and still can be) carried out on a 'without prejudice' basis where there is an existing dispute between the parties and these could be protected by privilege (note, however, that raising a grievance is not necessarily enough to amount to a 'dispute'). 'Protected conversations' were introduced to get round the situation where there is no existing dispute, provided the parties adhere to the rules set out in the ERA and the ACAS Code of Practice on Settlement Agreements. For example, 'improper behaviour' (of which the ACAS Code gives examples) may prevent the discussions being protected.

However, s111A only prevents the discussions being referred to in a claim for 'ordinary' unfair dismissal, not claims for discrimination, breach of contract or automatically unfair dismissals (such as dismissal in connection with whistleblowing, family leave or a flexible working request). ET proceedings might involve some claims which are inadmissible under s111A (e.g. 'ordinary' unfair dismissal) and other claims that are not inadmissible (e.g. sex discrimination). There may be further complications where discussions are also alleged to be 'without prejudice'. These were issues the EAT had to grapple with recently in Faithorn Farrell Timms LLP v Bailey.

Mrs Bailey was a secretary for Faithorn Farrell Timms LLP (FFT), a firm of surveyors. She had worked there for over 5 years but towards the end of 2014, an issue arose about her part-time working. Mrs Bailey alleges that it was made clear to her that part-time working was no longer an option and so she initiated a discussion about the termination of her employment. In January 2015 Mrs Bailey's solicitors wrote two letters to FFT marked 'Without Prejudice – subject to contract' setting out her position and offering settlement. In its two replies to these letters, FFT did not mark the correspondence in this way.

Later that month Mrs Bailey raised a grievance internally referring to the letters between her solicitors and FFT as 'open correspondence'. A letter from FFT's solicitors then sought to refer to the previous discussions as 'without prejudice' but this was not accepted by Mrs Bailey. Subsequently, a report by FFT into her grievance referred to the same letters with no comment as to whether they were 'open' or 'without prejudice'. When her grievance was not upheld (and no settlement was reached), Mrs Bailey resigned and commenced ET proceedings alleging unfair constructive dismissal and sex discrimination. Both Mrs Bailey in her ET1, and FFT in their ET3, referred to the content of the correspondence and no issue was raised as to whether it was privileged.

At a preliminary hearing, FFT's representatives claimed that the correspondence should not be admissible. The ET decided that the documents were not wholly protected either by the provisions of s111A Employment Rights Act 1996 nor were they privileged via the common law 'without prejudice' rule. FFT appealed to the EAT and Mrs Bailey cross-appealed.

Hearing the appeal, the EAT ruled firstly that the provisions of s111A regarding 'pre-termination negotiations' protected both the content of the discussions and the fact that discussions were being held at all. This was the same for any internal discussions about settlement negotiations – the discussions remained protected even when shared with others in the employer's organisation (such as other managers, HR or a board of directors).

Secondly the EAT ruled that the provisions of s111A did not allow the parties to 'waive' the confidentiality of the discussions. S111A was not to be confused with the 'without prejudice' rule, where privilege could be waived. In s111A, Parliament had not used the same language and there was no suggestion that it was possible to waive the confidential nature of the discussions in any circumstances.

As to whether the correspondence was privileged under the 'without prejudice' rule, the EAT found that it had initially been protected, but FFT had on several occasions failed to object to Mrs Bailey referring to the discussions, including in her ET claim, and indeed FFT had itself referred to the contents of the correspondence. This was enough to show that FFT had impliedly waived privilege.

What can employers learn from this?

Many employers will have made use of the s111A provisions where there are concerns about an employee's performance or conduct and it is likely that it will lead to formal disciplinary proceedings. This case is welcome clarification of how the provisions work (rather differently to the 'without prejudice' rule), and what employers need to bear in mind, namely:

  • s111A renders the very fact of pre-termination discussions, as well as the details of any offer, inadmissible in ET proceedings. However, the fact of discussions could be admissible under the 'without prejudice' rule;
  • the 'without prejudice' rule may protect pre-termination discussions, but will only apply if it relates to a genuine attempt to resolve an existing dispute;
  • s111A can apply where there is no existing dispute, but is inflexible in that confidentiality cannot be waived, so neither party can refer to the discussions in an 'ordinary' unfair dismissal claim even if both parties wanted to;
  • employers and HR staff need to understand the difference because privilege can be waived under the without prejudice rule, impliedly as well as expressly. It appears in this case that FFT were unaware of the significance of the without prejudice rule when referring, in 'open' correspondence and in its ET3, to discussions which were initially without prejudice. FFT's lawyers were later unable to assert privilege because FFT had impliedly waived it;
  • confidentiality may be lost under s111A if one of the parties has engaged in 'improper behaviour' such as harassment, intimidation, bullying or undue pressure. The EAT held that this was much wider than 'unambiguous impropriety' which may render 'without prejudice' discussions admissible in ET proceedings. However it was referred back to the ET to decide whether there had been improper behaviour;
  • the 'without prejudice' rule may protect settlement discussions about a range of different claims (although using the without prejudice rule as a cloak for discrimination will amount to 'unambiguous impropriety', resulting in the protection being lost). Under s111A, however, claims such as discrimination, automatically unfair dismissal and breach of contract are not protected. Where there is a claim for both 'ordinary' unfair dismissal and, say, sex discrimination, the ET will be required to ignore the discussions for the unfair dismissal claim, but not the discrimination claim, despite the fact that it is likely to be the same Employment Judge hearing both claims.

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Vicky Schollar
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