Without Prejudice correspondence: does there need to be an existing dispute?
Where there is an ongoing dispute, oral or written communications made in a genuine attempt to resolve that dispute are generally considered to be "without prejudice", if they are stated to be on such a basis.
Without prejudice correspondence is legally privileged and, as such, is not admissible as evidence in litigation. The rationale is to encourage parties to enter into settlement negotiations without worrying that anything said in negotiations may be used against them in future litigation.
Portnykh v Nomura is a recent case where the employer proposed to dismiss its employee for misconduct. The employee entered into negotiations explaining that the reason for dismissal should be stated as redundancy, which was agreed to. Negotiations later broke down and the employee contended he had been unfairly dismissed as a result of making protected disclosures.
The employer wished to rely upon earlier correspondence that evidenced how the dismissal had been based on misconduct reasons. The employee argued that the correspondence had been part of “without prejudice" discussions and was, therefore, inadmissible as evidence.
The Employment Appeals Tribunal (“EAT”) overruled an earlier finding that there had been no “dispute” between the parties. Whilst the litigation did not commence until some time later than the negotiations took place, negotiations were centred on the issue of dismissal/signing a compromise agreement, which clearly itself had the potential for litigation.
The EAT also confirmed that although a dispute or potential dispute will not exist in every case where a compromise agreement (now termed a settlement agreement) is being negotiated, it was felt that this would often be the case.
The case is therefore a useful reminder to employers of the circumstances which will be protected by the “without prejudice” rule. Employers should take care to ensure that there is clear evidence for potential litigation before entering into without prejudice correspondence. For the avoidance of doubt, employers should always clearly mark correspondence “without prejudice”.
The EAT also suggested that the without prejudice rule may arise where there are "negotiations" taking place but where no dispute exists. However, no definitive answer was given on this point. Until the point is considered further, it is unclear precisely which circumstances this may cover and employers would be wise to stick to the confirmed principles above.
Employers should also not forget the ability to enter into ‘settlement discussions’, following changes to the law in 2013. However, unlike the “without prejudice” rule which can apply to any type of employment claim, settlement discussions only apply to ordinary unfair dismissal claims, and only remain inadmissible as evidence where no “unambiguous impropriety” (such as blackmail or discrimination) exists. As there are also requirements for a “genuine dispute” and a “genuine attempt to settle the dispute”, specific legal advice is recommended before such discussions take place.