Pre-Termination Settlement Negotiations

Louise Walker
8th Jul 2016

Claimant cannot rely on existence of pre-termination settlement negotiations in support of an unfair dismissal claim.

Employment contract


In the recent case of Faithorn Farrell Timms LLP and Bailey, the Employment Appeal Tribunal (EAT) had to consider whether evidence of pre-termination settlement negotiations was admissible in an unfair dismissal claim. In doing so, the EAT had to determine whether there was any difference between the common law without prejudice privilege and the scope of Section 111A of the Employment Rights Act 1996 (Section 111A) which has rendered evidence of pre-termination negotiations inadmissible in relation to unfair dismissal claims, since 2013.


Looking firstly at their findings regarding Section 111A (see our article on ‘Settlement Agreements and pre termination negotiations’ included in our update 144 (July 2013)), the EAT found that any reference to the existence of pre-termination negotiations is inadmissible, as well as the content of those negotiations. The EAT held that this must also extend any internal discussions within the business, for example, between managers and HR.


The EAT confirmed that this privilege cannot be waived under Section 111A.


This is in contrast to their position on the common law without prejudice privilege, under which the EAT confirmed that references to the existence of settlement were admissible.


Unlike Section 111A, parties can agree to waive privilege and that requires consent from both parties. In this particular case, the negotiations had been openly referred to during an internal grievance by the Claimant. The fact that she had also referred to them in her ET1 claim form and the Respondent had not objected to this, and in fact referred to the same material in their ET3 form, resulted in the EAT concluding that both parties had clearly agreed the privilege should be waived.


So when does ‘without prejudice’ and s111A apply?


It can become a complicated scenario when evidence could potentially be covered by both without prejudice and Section 111A. Whilst this case found that the Claimant could not rely on the existence of any settlement negotiations in support of her unfair dismissal claim, there are important points to note in relation to this:


  • The scope of Section 111A is limited to unfair dismissal claims only.


  • This means that such evidence may be admissible if the Claimant has another claim, eg discrimination.


  • This raises practical difficulties in ensuring that a Tribunal is not influenced by such evidence in deciding on an unfair dismissal claim, having heard the evidence in respect of another claim.


  • Section 111A(4) also states that if there is evidence of ‘improper behaviour’ during any settlement negotiations then evidence of these negotiations becomes admissible, to the extent that the Tribunal considers this to be just. Examples of such improper behaviour could be fraud, harassment, bullying or putting undue pressure on a party.


  • In this particular case, the Claimant also questioned whether settlement negotiations can fall within the scope of Section 111A if the employer has made no actual offer of settlement. The EAT has remitted this question back to the Tribunal for their decision on this, within the remit of this case’s circumstances, however, it seems questionable whether an employer can rely on Section 111A in this situation.


This decision by the EAT brings some welcome clarity in relation to when settlement negotiations can be referred to and when they can’t in relation to unfair dismissal claims. However, each case must be taken on their own individual circumstances but this is worth keeping in mind if you are thinking of instigating pre-termination settlement negotiations.


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