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As lawyers we regularly use the “without prejudice” rule as a useful tool to try to settle disputed matters. However it is also a common feature used by employers with departing (or soon to be departed) employees.

“Without Prejudice” is a rule of evidence that any communications with the purpose of settling an existing dispute cannot be put before the court unless both parties to the communication agree. This limitation continues even after the dispute has been concluded.

It is not surprising that such discussions commonly arise in the employment sphere, and commonly at the internal stages – Employers knowing that their interests may be best served by settling rather than incurring the legal costs of defending an Employment Tribunal (which aren’t recoverable), the lost management time and the lottery which a tribunal can sometimes be.

However there appears to be a tendency to use “without prejudice” too readily, perhaps employers not fully understanding the application of the rule in order to gain protection!

So What Happens in Reality?
The case of Mezzotero (2004) fuelled claimant solicitors to carefully examine the use of “without prejudice” within internal discussions between Employer and employee. It is necessary to rehearse the brief facts of the case to understand why.

Mezzotero (M) raised a grievance of sex discrimination following her return from maternity leave. At the grievance hearing (and before it had commenced formally) her employer asked her if she would agree to without prejudice discussions. She agreed and upon doing so the employer expressed their wish to terminate her employment and pay her a termination payment. M sought to rely on these discussions in support of her claim for sex discrimination and victimisation. The EAT agreed with this course of action on two grounds:

• The “without prejudice” rule could not be used to make the content of the discussions privileged as there was no “existing dispute” to be settled. The first M had any idea that there might be a dispute (ie. her leaving) was within the so called “without prejudice” discussions themselves. A grievance is not automatically a “dispute” between the parties. It is a preliminary attempt to avoid being in dispute.
• As this case involved discrimination allegations it may be in order for the court to look behind such discussions to “root out the evil of discrimination” on public policy grounds.

Recent Cases
Two more cases (2007) have sought to deal with “without prejudice” rule. These have reaffirmed that such a rule does exist and plays an important role within the workplace, but can only be invoked where there is an “existing dispute” between the parties.

One case dealt with the issue of bilateral implied waiver of the application of the “without prejudice rule” to their discussions. Here the two parties had had such discussions in an earlier dispute. When a further dispute arose these discussions were relied on by both parties in an internal formal grievance hearing. The Court held that both parties had agreed to waive the privilege attached to the discussion by disclosing the content in the grievance hearing. Both parties must have known that a possible outcome would be for the content of the grievance meeting to be detailed within Tribunal proceedings.

The other case involved allegations by the employee that there was no genuine dispute and so the so called “without prejudice” correspondence could be disclosed. Here the two parties had been exchanging correspondence about a termination package following the Employers expressed intention to dismiss the employee before the end of his contractual term. The court concluded that the correspondence was privileged. There was a clearly a potential for litigation and a genuine attempt to settle that – “the crucial consideration would be whether in the course of negotiations the parties contemplated or might reasonably have contemplated litigation if they could not agree”.

Points to consider:

• Labelling a discussion “without prejudice” does not mean it will be so.
• To be “without prejudice” there should be a “dispute” – don’t assume the employee knows which route you are taking ie termination.
• A “grievance” does not automatically mean there is a dispute.
• Try to allow grievances or disciplinary procedures to run their course to enable the disputes to become more clearly set out.
• Try to make the employee make the first move towards settlement.
• Take extreme care in discrimination cases – avoid admissions or threats.
• Keep the decision maker in internal procedures outside the scope of negotiations.
• Any meetings or correspondence should be clearly marked without prejudice to demonstrate the parties intentions.
• Avoid referring to “without prejudice” discussions or correspondence subsequently and if you need to, do so with extreme care.

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