The facts
A “without prejudice” offer of termination of employment under a settlement agreement is sometimes a pragmatic option in the context of a difficult grievance. If an offer is genuinely made on a “without prejudice” basis, evidence about the offer cannot be used against the employer (or the employee) in legal proceedings if settlement is not reached. However, an offer will only be treated as “without prejudice” if, at the time the offer is made, there is an existing dispute, and the settlement discussions are a genuine attempt to resolve that dispute. An EAT judgment from 2004 cast doubt over whether a grievance constitutes an existing dispute and, therefore, whether settlement discussions held after a grievance is raised, but prior to litigation, can be treated as being “without prejudice”.
Even where the without prejudice rule is engaged, evidence about a settlement offer can be admissible if there is a clear case of “unambiguous impropriety” – for example, blackmail.
In this case, Mrs Garrod was employed by Riverstone Management Ltd as its Company Secretary. She raised a grievance about her treatment after her return from maternity leave, alleging mistreatment and pregnancy and maternity discrimination; including bullying and harassment. At a meeting on 8 November 2019 with Riverstone’s external HR and employment law adviser, Mr Sherrard, her grievance was discussed. Mr Sherrard then said he wanted to have a “without prejudice” discussion (though he did not explain what this meant, and she did not ask). Mr Sherrard described the employment relationship as “fractured” and “problematic” and said that Riverstone would like to make an offer to terminate her employment, mentioning a sum of £80,000. Settlement was not reached, Mrs Garrod’s grievance was later rejected, and she eventually resigned. She claimed in the employment tribunal that she had been subjected to pregnancy/maternity discrimination, harassment and unfair constructive dismissal.
Mrs Garrod included reference to the 8 November meeting in her particulars of claim. Riverstone successfully resisted this inclusion on the basis the meeting was “without prejudice” and privileged. Mrs Garrod’s argument was that there was no “existing dispute”, so the settlement discussions were not “without prejudice”. Her argument failed. Mrs Garrod was also unsuccessful in arguing that evidence about the “without prejudice” discussion should be admissible because there had been unambiguous impropriety – that Riverstone had tried to use the without prejudice rule to force her out of the business and that Mr Sherrard’s manner had been intimidating and aggressive.
An employment tribunal held that the without prejudice rule applied and there had been no unambiguous impropriety. Mrs Garrod appealed to the EAT. The EAT dismissed Mrs Garrod’s appeal.
Key to the decision of the employment tribunal and EAT that the settlement offer was “without prejudice”, was the tribunal’s decision that the grievance was an “existing dispute” at the time the “without prejudice” offer was made. The EAT held that the earlier 2004 EAT decision, which held that the existence of a dispute is not proved purely by the fact the employee has raised a grievance, did not set a precedent that a grievance could not constitute an existing dispute, just that it may not (depending on the facts of the case).
Relevant to the decision that there was an existing dispute in Mrs Garrod’s case, were the facts that:
- Mrs Garrod’s tribunal claim was not based on what happened during the “without prejudice” meeting.
- Mrs Garrod’s grievance (raised before the meeting) was fundamentally the same as the tribunal claim.
- In contrast, in the 2004 case, the EAT Judge had commented that the allegation the claimant had suffered discrimination when her employers sought to end her employment (after she had raised a grievance) was at the heart of the claim. This was not the premise of Mrs Garrod’s claim.
- Mrs Garrod’s grievance referred to ACAS, early conciliation, and legal claims. This language supported the argument that there was an “existing dispute”.
Mrs Garrod’s evidence regarding Mr Sherrard’s manner was rejected. The EAT confirmed that the unambiguous impropriety to the without prejudice rule can only be disapplied in "the very clearest of cases" or in "truly exceptional and needy circumstances", neither of which applied here. The fact that the company had suggested termination was not sufficient to show that it had acted with unambiguous impropriety.
What does this mean for employers?
This is a useful case for employers. It shows that “without prejudice” offers made in the context of a grievance may, depending on the facts of the case, benefit from the without prejudice rule. It also shows that suggesting termination of employment in the context of a grievance will not necessarily undermine the without prejudice rule, even where the employee has indicated that they wish to stay in employment.
Not all grievances will constitute an existing dispute, and labelling a discussion “without prejudice” will not necessarily mean that this is the case. Employers must still be cautious when initiating “without prejudice” discussions in the context of a grievance, and in what they say during the discussions, as there is a risk that the facts of the case will not support the without prejudice rule.
