UK: Employment Law: Without Prejudice?

The without prejudice principle can be used to protect "off the record" discussions so long as a genuine dispute exists between the parties and the without prejudice communication is a true attempt to settle the dispute. The principle is designed to encourage frank discussion and aid settlement.

It was thought that providing that a meeting was stated to be "without prejudice", any discussions could not later be submitted in evidence at subsequent hearings. This meant that when faced with an employee that you wanted to be rid of, if you held a without prejudice discussion where a pay off was suggested but turned down the discussion and the offer could not later be relied on to substantiate any claim. In such a situation an employee may, for example, bring a constructive dismissal claim alleging that you had eroded all trust and confidence that existed between you by making an offer of pay off. However, it was believed that so long as the employer had caveated the meeting as without prejudice the claim would fail as the very evidence he sought to rely on would be inadmissible. However the recent case of BNP Paribus v Mezzotero has considerably limited the scope of the without prejudice rule in relation to employment termination negotiations.

In Mezzotero the employee, a woman employed as a vice president at an investment bank, was encouraged not to return to her usual duties following her second period of maternity leave. She was told at her pre-return to work meeting that the market was difficult and that her old role was no longer available but that if she wanted to return to work she should find another role within the bank. Ms Mezzotero raised a grievance claiming that she was being demoted and humiliated by these actions and she concluded that this treatment could only be explained by either the fact that she had been on maternity leave; or that she was a woman.

In response to the grievance being raised Ms Mezzotero was called into a meeting by her employers and was informed that the matter was still being investigated. At that stage Ms Mezzotero’s employers stated that the meeting was to be held without prejudice and explained that this meant that any matters that they discussed could not be used in subsequent legal proceedings. It was explained to Ms Mezzotero that the bank felt that she was no longer suited to her role and consequently they wished to terminate her employment but that they were willing to offer her a package. Ms Mezzotero was advised to consult her solicitor on the package and to clear her desk.

Ms Mezzotero declined to accept the package offered and brought, amongst others, a claim of victimisation under the Sex Discrimination Act. As evidence for this claim Ms Mezzotero sought to rely on the discussions that took place during the without prejudice meeting. The bank claimed that the discussion that took place during the meeting was inadmissible due to the fact that it was held without prejudice and was an attempt to settle an existing dispute. The Employment Tribunal held that there was no genuine dispute in existence when the meeting took place and therefore to hold that the discussions at the meeting were without prejudice would be an abuse of the principle.

The Employment Appeal Tribunal dismissed the bank’s appeal, reiterating that for the without prejudice principle to apply there had to be a genuine dispute in existence and the discussions had to be for the purpose of settling that dispute. The EAT specified that the fact that a grievance had been raised by Ms Mezzotero and that this was still live at the time that the meeting was not necessarily evidence that the parties were in dispute. It was stated that a grievance may ‘be upheld, or alternatively dismissed for reasons which the employee finds acceptable, so that the parties never reach the stage where they could properly be said to be "in dispute"’.

Additionally, the EAT went on to illustrate how the Tribunal should interpret the principle in a flexible and pragmatic manner to avoid abuse of the without prejudice rule. The EAT stated as the meeting was only labelled without prejudice at the start when Ms Mezzotero had no opportunity to seek legal advice and she was clearly in a vulnerable position, there was an imbalance in power between the parties. The EAT stated that in such circumstances, there would be a tendency for the tribunal to interpret the without prejudice rule in the employee’s favour in an attempt to protect the weaker party. This creates a problem for employers.

The reason for the existence of the without prejudice principle is to allow parties to speak honestly without the fear that these discussions will be admitted in subsequent legal proceedings but Mezzotero indicates that even where there is a genuine dispute, such protection will not be afforded where there is an imbalance of power. Although there is likely to be an imbalance of power in most employer and employee conversations, it would be wrong to conclude that without prejudice protection can no longer be relied on in the employment context.

The EAT addressed this issue and stated two possible justifications for such reasoning in the Mezzotero case. Firstly, that it is a well known principle that the without prejudice rule should not be allowed to protect discussions which are of "unambiguous impropriety". It was suggested that in the case of discrimination to allow an employer to hide behind the without prejudice rule would certainly be an "unambiguous impropriety". Secondly, that the Mezzotero case involved a claim for sex discrimination and such claims are known to be fact-sensitive. Accordingly, in order to fairly hear a discrimination claim it is vital that the tribunal has all the primary facts before it. To allow an employer to call a meeting without prejudice and as a consequence achieve privileged status for everything discussed during that meeting would clearly be wrong, and not in the public interest if the employer was to use the meeting an opportunity to be openly discriminatory. For example, an employer telling an employee "we no longer wish to employ you because you are black" cannot be allowed protection via the without prejudice rule as this is clearly an abuse.

The EAT stated that any decision to waive privilege must be based on the particular circumstances of the case. It does appear that in Ms Mezoterro’s case, the fact that her claim was one of discrimination may have proved the decisive factor in the bank being denied the protection of the without prejudice principle.

In conclusion, employers should act cautiously in severance negotiations. The Mezzotero decision could be interpreted as only applying to fact-sensitive or discrimination claims - there is certainly a strong suggestion that the without prejudice principle will be interpreted pragmatically and thus in favour of the weaker party, the employee (whether the employee seeks the protection of the rule or seeks the rule to be disapplied). Where claims of discrimination are concerned it appears clear that the employer will not be allowed to hide behind the rule, but where unfair dismissal claims are concerned the position looks far less certain. The best advice to employers would be to ensure that severance negotiations are transparent and that nothing is ever said under the supposed protection of the without prejudice rule the employer would not wish to have repeated in the employment tribunal.