Are settlement negotiations undertaken under S111A Employment Rights Act (ERA) 1996 admissible in Employment Tribunal proceedings?
This was considered in the case of Faithorn Farrell Timms LLP v Bailey UKEAT/0025/16.
S111A came into force in July 2013, which now makes it easier for employers to make pre-termination settlement offers to employees. S111A provides that pre-termination offers would not be admissible in subsequent unfair dismissal proceedings. This privilege under S111A does not apply to other types of claims, for example discrimination.
The facts of the present case
Mrs Bailey, the claimant, was employed by Faithorn Farrell Timms, the respondent. The claimant and respondent entered into settlement negotiations in December 2014. The negotiations broke down and the parties were in dispute by January 2015.
The claimant and the respondent exchanged without prejudice correspondence regarding settlement negotiations. Later in January 2015, the claimant then raised a grievance on an open basis and in her grievance stated that she was relying on her without prejudice letters to the respondent. The respondent’s replies were expressed to be without prejudice.
In February 2015, the claimant resigned and brought claims against the respondent for constructive unfair dismissal and sex discrimination. In her claim form, the claimant referred to the initial settlement negotiations and the without prejudice letters. In its response form, the respondent did not object to the reference to the without prejudice letters.
However, at a later tribunal hearing, the respondent did raise the issue of admissibility of the settlement negotiations.
Decision of the Employment Tribunal (ET)
The ET held that S111A only restricted the financial details of the negotiations as inadmissible, and not the fact that the negotiations had actually taken place. It held that the documents were neither rendered wholly inadmissible, nor by the common law without prejudice principles.
Arguments in the Employment Appeal Tribunal (EAT)
The respondent appealed, arguing that the ET failed to distinguish between the two claims of constructive unfair dismissal and sex discrimination for the purpose of the S111A privilege. They also appealed the finding that only the terms of the offer were protected under S111A and not the fact that the pre-termination settlement negotiations took place.
The claimant cross appealed, arguing that the respondent had waived privilege as she referred to the documents on an open basis in her ET1 and grievance and this was not disputed by the respondent.
The EAT held that:
- The common law without prejudice rule privilege did not apply as it had been waived by the respondent failing to object to the evidence raised in the ET1
- Unlike the without prejudice privilege, the S111A privilege cannot be waived for unfair dismissal claims
- S111A protects not only the content and financial terms of the offer within settlement negotiations, but also the fact that the settlement negotiations took place and this extends to any discussions held with a view to terminating the employment on agreed terms
- An employer’s internal conversations between managers and HR advisors are also protected by the privilege
- The tribunal should have separated out the claims, so that information not protected by S111A could have been heard in relation to the sex discrimination claims
- The privilege is removed where there is ‘improper behaviour’. The ACAS Statutory Code gives guidance on what might constitute improper behaviour, including but not limited to: bullying and intimidation, putting undue pressure on a party or saying that if a settlement proposal is rejected then the employee will be dismissed
- If no improper behaviour is established, S111A privilege cannot be waived, unlike without prejudice privilege which can be waived by the parties
It is now clear that the S111A privilege that protects settlement negotiations cannot be waived in subsequent unfair dismissal proceedings. However, negotiations still remain unprotected by the S111A privilege in relation to claims other than unfair dismissal, for example discrimination claims.
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