Approaching a settlement – ’without prejudice’ correspondence and ’protected conversations’ – what’s the difference?

Many employers are familiar with the concepts of ‘without prejudice’ and ‘protected conversations’ as a means to facilitate exit negotiations with employees. However, both terms are frequently used incorrectly.

To avoid the risk of businesses unwittingly using the wrong terms and leaving themselves exposed, we have set out their differences below.

‘Without prejudice’ correspondence

The ‘without prejudice’ rule prevents anything written or said in a genuine attempt to settle an existing dispute from being presented as evidence in any subsequent litigation before a tribunal. An employer can therefore only refer to correspondence as being ‘without prejudice’, and thus protected, if there is an ongoing dispute between the parties at the time of the correspondence and the parties are making a genuine attempt to settle the dispute.

An employer having an ‘off the record’ conversation with an underperforming employee would therefore not be covered, and the employer could be subject to a claim of constructive unfair dismissal or an argument that any subsequent dismissal was pre-determined and therefore unfair.

The dispute will most likely be in relation to the employee bringing, or contemplating bringing, a claim in respect of their employment or its termination. However, this is not a definite rule.

So long as there is evidence that a dispute exists, this will be sufficient for the protection to apply. Additionally, the employee must have consented to having a ‘without prejudice’ discussion, meaning they understand the consequences this has on any future claims they may bring.

An exception to the ‘without prejudice’ rule is if the employer has used the ‘without prejudice’ correspondence as a cloak for “perjury, blackmail or other unambiguous impropriety”. If this is found to be the case, the correspondence will not be protected.

‘Protected conversations’

‘Protected conversations’ were introduced under S111A of the Employment Rights Act 1996 to enable parties to have ‘off the record’ discussions in situations where there is no formal or existing dispute. This was intended to make it easier for employers to initiate settlement conversations.

Such conversations will most commonly be used where an employer wants to have certain conversations without following a formal process, such as offering settlement agreements for underperforming employees to avoid going through the performance management process.

If the employee signs the settlement agreement, they will waive their right to bring any claims. However, if the employee chooses not to sign the settlement agreement the protection will only apply to claims of unfair dismissal. If an employee who has declined a settlement agreement brings any other type of claim in the tribunal, these conversations will not be protected. Protected conversations should therefore be approached with care in certain circumstances, for example, in relation to employees on long-term sickness absence, given the possibility of a subsequent disability discrimination claim, or where employees have made allegations of harassment, bullying or other forms of discrimination.

Additionally, if the employer’s behaviour is found to be “improper”, this protection will be lost.

For further guidance on initiating exit discussions with employees, including what to include in the settlement agreement, please get in touch with a member of the Employment Team who will be happy to help.