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Settlement agreement was still without prejudice even though discussions were "amicable"

31 January 2014 #Employment


Employers, particularly HR practitioners, need to be very careful before getting into discussions with employees over possible termination of employment. The risk is that the employee will rely on those discussions in a tribunal claim later on if agreement is not reached.  In an interesting case concerning settlement agreements, the EAT (overturning an Employment Tribunal’s decision) has held that without prejudice correspondence that included a draft compromise agreement was inadmissible as evidence in the employee`s subsequent automatic unfair dismissal claim (Portnykh v Nomura International Plc), even though the discussions were amicable.

Under the new rules since 29  July 2013, employers can have discussions with employees over termination of employment where the employer makes a genuine offer of severance terms, without the risk of those discussions coming to the attention of an employment tribunal – unless the claim is one of discrimination or one of the categories of automatically unfair dismissal. Hence, in this case, where the claim was that the employee had been automatically unfairly dismissed because he had made a protected disclosure, the new rules are of no assistance.

Dr Portnykh was dismissed for misconduct. During settlement negotiations between the parties it was agreed that the reason for the dismissal could be changed to redundancy.   However, the settlement discussions failed and Dr Portnykh issued proceedings .

In order to attract the protection of without prejudice privilege there must be a genuine attempt to settle a dispute between the parties. The EAT, overturning the Tribunal’s decision, found that there was a dispute between the parties; correspondence relating to the proposed dismissal of Dr Portnykh and discussions surrounding a settlement agreement (including payment of a settlement sum) clearly pointed to there being a dispute.  The fact that the discussions and correspondence seemed amicable was irrelevant. 

As a further point of interest, the employer also sought to argue that the employee should not be allowed to rely on without prejudice privilege in respect of the settlement discussions because of  ‘unambiguous impropriety’. The employer did not succeed on this point and the EAT concluded that this rule would not apply simply because the employer would be “disadvantaged” by the exclusion of the evidence. It will only apply in clear cases of abuse of privilege, i.e. in very “limited” cases.

Clarkslegal, specialist Employment lawyers in London, Reading and throughout the Thames Valley.
For further information about this or any other Employment matter please contact Clarkslegal's employment team by email at employmentunit@clarkslegal.com by telephone 020 7539 8000 (London office), 0118 958 5321 (Reading office) or by completing the form on this page.

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