The Employment Appeal Tribunal (EAT) confirmed in Garrod v Riverstone Management Ltd that a settlement offer put forward by the employer was protected from disclosure in subsequent legal proceedings because the employee’s grievance amounted to a ‘dispute’ for the purpose of the without prejudice rule and the employer’s behaviour was not obviously improper.
This is welcome news for employers and will provide comfort and useful guidance to those who may propose settlement at an early stage on commercial grounds and in order to avoid what could be a stressful and time-consuming grievance investigation process.
Background
Communications between parties in a genuine attempt to settle an existing dispute are inadmissible in legal proceedings as they are protected by ‘without prejudice privilege’.
In BNP Paribas v Mezzoterro, the EAT said that raising a grievance does not necessarily mean that there is a dispute in place – as, for example, the grievance may be upheld.
Without prejudice protection can also be lost if a communication is used to hide behaviour which is obviously improper, such as dishonesty or fraud (known as ‘unambiguous impropriety’).
Facts
In this case, the employee, Ms Garrod (who had some legal training) was employed by Riverstone Management Ltd as a company secretary. She brought a grievance in which she complained of pregnancy and maternity discrimination.
A preliminary meeting took place between Ms Garrod and Mr Sherrard (an HR and employment law adviser). After a general discussion about the grievance, Mr Sherrard said he would like to have a ‘without prejudice’ discussion and he put forward a settlement offer to resolve the dispute and mutually agree the termination of Ms Garrod’s employment.
Ms Garrod was upset by this offer being made and did not accept it. When her grievance and appeal were not upheld, she resigned and brought Employment Tribunal (ET) claims for pregnancy and maternity discrimination and constructive unfair dismissal. She referred to the without prejudice conversation in her claim form. The employer argued that these references should be removed and excluded from evidence as they were protected by without prejudice privilege.
ET decision
The ET held that the without prejudice discussions were protected and that reference to them should be removed from the claim form.
Ms Garrod appealed.
EAT decision
The EAT dismissed Ms Garrod’s appeal and confirmed that without prejudice privilege applied to the offer made. The EAT considered that:
- the Mezzoterro decision did not mean that a grievance could never amount to a dispute;
- in this case, the grievance evidenced a dispute as it indicated that Ms Garrod was prepared to litigate and the fact that Ms Garrod was legally trained supported this. Specifically, the grievance referred to the infringement of her legal rights, to ACAS Early Conciliation and contained fundamentally the same information as her ET claim;
- unlike Mezzotero (where the ‘without prejudice’ communications were also the alleged unlawful acts on which the claim was based), Ms Garrod's claim was based only on the allegations set out in her grievance, meaning that the substance of the dispute existed at the time the without prejudice conversation was held;
- the settlement offer was genuinely aimed at resolving that dispute and there was no improper behaviour. There was nothing unusual about seeking to terminate employment on financial terms and the fact that Ms Garrod was upset by this (and wanted to remain in her job) did not negate the intention to resolve the dispute or make it improper. There was no evidence of Mr Sherrard being anything but polite and professional in the meeting; and
- the exception of ‘unambiguous impropriety’ will only be applied in ‘truly exceptional and needy circumstances’.
Fladgate comment
This is a helpful case for employers, particularly as it confirms that in certain circumstances:
- a grievance can amount to a ‘dispute’ and be used to initiate without prejudice discussions; and
- employers can propose termination as part of a settlement offer without losing the protection of without prejudice privilege - even in the context of a grievance where the employee has not said they want to leave.
However, employers should still take some care before initiating without prejudice discussions following receipt of a grievance; whether or not a grievance is sufficient to amount to an existing dispute will depend on its content and context (including who is bringing it).
Employers should continue to consider carefully if a dispute is in place before making a without prejudice offer. If the risk of a claim only extends to one of unfair dismissal, you may wish to have a 'protected conversation' (under section 111A of the Employment Rights Act (ERA)) instead because there is no need to establish that there is an existing dispute for the protection to apply in those circumstances. However, if there are factors which could lead to other claims (such as discrimination) then the conversations will not be protected under ERA in relation to such claims and we recommend waiting until there is a more obvious dispute to start settlement discussions.
Where there is any doubt about whether the discussions are protected or not, try not to say or do anything which you would not want disclosed at the ET - particularly if there is a risk that the employee may base their claim on the content of the without prejudice discussions (e.g. argue that those discussions were discriminatory) as they are less likely to be protected in such circumstances.
