Pre-termination discussions: Do recent developments in protection really help employers?

by DLA Piper
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Pattie Walsh, Location Head of our London office, comments:  In July 2013, in the spirit of allowing employers to engage in more open and frank conversations with their employees, the Government introduced a new regime of ‘protected conversations’, preventing certain discussions from being admissible in tribunal proceedings.  On the face of it this employment law reform should have been welcome news for employers. However, in practice, the system is fraught with difficulties opening up the question of whether it has truly added anything to the existing ‘without prejudice’ regime….something which has been reinforced by a recent case potentially extending the ability for employers to rely on the ‘without prejudice’ rule to avoid pre-termination conversations being used as evidence in a tribunal.

The new ‘protected conversation’ provisions have the effect that an employer’s pre-termination negotiations with an employee will be inadmissible as evidence in any subsequent tribunal proceedings relating to unfair dismissal.  The first limitation is immediately obvious – it only applies to  unfair dismissal proceedings. If an employee brings a claim for any other reason (including in relation to an automatically unfair dismissal), the protection does not apply. Protection may also be lost if either party engages in ‘improper’ behaviour – pending any cases on this issue, what constitutes ‘improper behaviour’ is currently full of uncertainty, meaning that employers will have to tread very carefully to ensure they do not inadvertently lose the protection.

The ‘protected conversations’ regime runs alongside the old ‘without prejudice’ principle. This is engaged where there is a dispute between employer and employee and operates to prevent discussions, that are genuinely aimed at settling the dispute, from being admissible in tribunal proceedings.  The potential difficulty with relying on the ‘without prejudice’ principle is identifying whether or not a dispute  has actually arisen. In the past, case law has, for example, established that the raising of a grievance does not necessarily amount to a dispute.  However, other case law has established that there is no need for litigation to have actually been commenced for the ‘without prejudice’ principle to come into play. There has, therefore, been uncertainty about the situations in which it may be relied upon and employers have had to exercise caution and recognise the risk that pre-termination discussions may ultimately end up as evidence. Further, the ‘without prejudice’ principle cannot be relied on if there is ‘unambiguous impropriety’. However, in practice, this is only likely to apply in exceptional circumstances.

Now, another case has come before the EAT which potentially extends the ‘without prejudice’ principle and may provide additional comfort to employers. It may also suggest that employers would be well advised to rely more on the ‘without prejudice’ principle than the ‘protected conversations’ regime.

In Portnykh v Nomura International Plc the EAT held that the ‘without prejudice’ principle should have a broad application. In this case, the employer announced that it intended to dismiss an employee for misconduct. However, following discussions between the parties it was agreed that the employee’s termination would be framed as a redundancy. The parties then began negotiating the terms of the redundancy, but these ultimately broke down. The employee then brought a claim in the employment tribunal and sought to exclude evidence of the pre-termination discussions (unusually, as it is normally the employer who seeks to do this). The employer, however, wished to use the discussions as evidence that the parties had agreed the reason for termination would be redundancy.

The tribunal found that the evidence could be submitted as there was no dispute between the parties. However, the EAT overturned this and said that the ‘factual matrix’ had to be considered. This clearly demonstrated in this case that there was a dispute, or the potential for a future dispute.  The EAT said that there does not need to be existing litigation or a hostile atmosphere. The mere potential for litigation will engage the ‘without prejudice’ principle.

 Although in Portnykh the ‘without prejudice’ principle did not work in the employer’s favour,  there is no doubt that these recent developments in case law and legislation offer employers more comfort than they may previously have enjoyed in relation to pre-termination discussions.   However, both ‘protected conversations’ and the ‘without prejudice’ principle have their limitations – in particular, although the ‘protected conversations’ regime will assist employers in some situations, it fails to really make the mark in practice. Employers would therefore be wise to ensure that any pre-termination conversations are well thought out, and that they always have an eye to the potential risk that what is said and done may ultimately end up as evidence in tribunal litigation.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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