Settlement Agreement: Ensuring negotiations are confidential – relying on the ‘without prejudice’ rule

One of the 5 Top Tips for employers that we blogged about on 22 November 2016, is to make sure that negotiations to resolve workplace disputes are legally ‘off the record’.

In the event that those talks break down, and the matter ends up in an Employment Tribunal or Court, an employer will not want the Judge to draw any adverse inferences either from the fact that it engaged in negotiations or what it was prepared to offer to settle.

Although entering into an off the record chat seems simple enough, it is surprisingly full of well hidden bear traps. However, with our advice these can be navigated and avoided.

There are two main ‘off the record’ discussions an employer can have: a ‘protected conversation’ and a ‘without prejudice’ discussion.  Protected conversations are relatively easy to set up and are useful where the matter is straightforward. However the law governing protected conversations does not cover all claims, and notably does not cover discrimination claims. Therefore it is highly recommended that employers only use the protected conversation once a solicitor has given the factual circumstances a review.

The safer method to have a confidential discussion is to engage the ‘Without Prejudice’ doctrine.

As a matter of public policy, the law will disregard any ‘Without Prejudice’ discussion that seeks to resolve an existing dispute, on grounds that that parties are more likely to agree settlement terms if they know that they can speak freely. The more cases that settle out of court, the better that is for the parties and the public purse which has to fund the courts.

However, like protected conversations, the Without Prejudice doctrine has its own quirks.

The first is that the parties cannot simply agree between them that their conversations or written communications are ‘Without Prejudice’. It is a matter of substance not form as certain factual conditions must first exist, namely, there has to be an existing dispute between the parties and the communication must be made in a genuine attempt to resolve it. We would always recommend that an employer does obtain express agreement from the employee to enter into Without Prejudice discussions because that is very persuasive in cases where the existence of those factual conditions is not clear.

When you are in the middle of a Tribunal or Court case, those conditions are obvious and do exist by virtue of the fact that one side is suing the other. However even then one has to be careful. While the dispute may exist, a mere rant at your opponent without any reference to an offer (yours or theirs) may not be confidential (however clearly you write ‘without prejudice’ at the top of the letter) because you are not trying to settle anything.

Similarly there is no dispute just when an employee has raised grievance. At the outset, there is at least the possibility that a dispute will not materialise if the grievance is upheld and so any approach on a without prejudice basis will not stick.

It can be difficult for employers to conclude with confidence that the qualifying conditions for a Without Prejudice conversation exist when the relationship just isn’t working out for some reason or other. For example where there has been no stand up row or obvious below par performance. We can help drill down and crystallise the reason into an issue that will qualify as a dispute.

You cannot abuse the ‘off the record’ rule. Employees will still be able to use comments made, for example as evidence of blackmail or unambiguous impropriety, so you still need to think carefully about what you say.

It is also advisable to consider other ways you may want to limit the scope. For example to mark any legitimate Without Prejudice correspondence as ‘without prejudice subject to contract save as to costs’ will make it clear that (a) nothing said or written in negotiations should give rise to a legally binding contract until all the terms have been agreed and signed by both parties and (b) that you can use the correspondence as evidence in relation to an applications for costs, for example if your employee caused unreasonable costs to be incurred by rejecting a fair and valid settlement offer.

If you make the correct use of it, it can be an extremely beneficial principle and can allow you to agree terms quickly and quietly saving considerable time and money. To make sure your negotiations remain confidential, first speak with your solicitor.

Please feel free to contact us if you need advice on a Settlement Agreement. You can contact your usual adviser or call 020 8971 1020 and ask for a member of the employment team. We have offices in Redhill, Wimbledon, Camberley, Woking and Teddington and you can find out more by visiting Settlement Agreements page.


Although correct at the time of publication, the contents of this newsletter/blog are intended for general information purposes only and shall not be deemed to be, or constitute, legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. Please contact us for the latest legal position.

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