When are serious allegations about an employee able to be made “without prejudice”?

In the course of an employment dispute or disagreement, it is fairly common for employers and employees to try to negotiate some kind of settlement. If these settlement discussions are unsuccessful, evidence of these negotiations is generally admissible in subsequent litigation. This confidentiality of negotiations is normally protected under the ‘without prejudice’ rule. This is not a rule to be found anywhere in statute but rather founded upon the public policy of encouraging litigants to settle their disputes by agreement and enables them to negotiate without fear that what is said will be used in evidence.

For this rule to be engaged, there must be an active dispute between the parties, and the communications must be a genuine attempt to solve them. Simply marking any communications as being ‘without prejudice’, either verbally at an in-person meeting or in written communications, is a strong indication that there is a genuine dispute and a genuine attempt to settle it, but it may not be conclusive of that fact. Equally, not all parts of the communications may be capable of being classified ‘without prejudice’.

Further, there are limits to the use of the rule, namely if the exclusion of the evidence in the ‘without prejudice’ discussion ‘would act as a cloak for perjury, blackmail or other ‘unambiguous impropriety’’.

The rule and this exception were discussed in the recent case of Swiss Re Corporate Solutions Ltd v Sommer. Here, the employer had put the employee at risk of redundancy on return from her maternity leave. No one else in her department had been put at risk, so she raised a formal grievance with her employer by email. She copied in her personal email address to her grievance emails for her records, but her employer regarded this as a data breach and commenced a disciplinary investigation after the grievance procedure had concluded.

In the course of the investigation, the employee made various discrimination and equal pay claims. The employer’s solicitor sent her a without prejudice letter detailing the allegations against her and suggesting that her misconduct could result in summary dismissal, criminal convictions, fines and breaches of FCA codes – all of which could make it difficult for her to work again in the regulated sector. They concluded their letter by offering her a settlement figure to leave employment.

The investigation into the data breach concluded that there had been a ‘technical’, low-level breach but no further disciplinary action was required. In any event, the employee was later made redundant, at which point she raised further claims against the employer, and sought an order that the without prejudice letter should be admissible in the employment tribunal on the basis that, proportionate to the allegations against her, the serious allegations made in the letter amounted to unambiguous impropriety.

The employment tribunal held that, taking account of the employee’s actual conduct and that the employer had made no complaints about the breach at the time she sent the emails, there was no basis for the letter to assert the severity of misconduct that it did. The employer’s letter had made ‘grossly exaggerated’ allegations to put pressure on the employee and this exceeded the unambiguous impropriety threshold. It allowed the without prejudice letter to be admitted as evidence. 

The employer appealed to the Employment Appeal Tribunal (EAT) which allowed the appeal. The EAT noted that it was not unusual for parties in negotiations to threaten to bring or continue legal proceedings against each other. Although the claims of misconduct made in the letter were exaggerated in severity, they did have a factual basis and exaggeration in itself was insufficient to make out the exception. The EAT made clear that a finding of unambiguous impropriety should only be made in a very clear case and that was not made out here. Nevertheless, they noted that the employer’s letter was not devoid of any impropriety – they indicated that it ‘sailed close to the wind’ and that there is always a danger of applying improper pressure by making threats of criminal or regulatory action.

What this case shows is that even in ‘without prejudice’ communications, employers should be mindful of what they are communicating to the employee and what pressure they might be applying, directly or indirectly. Although the threshold for these communications to be admissible is very high, it is not impossible to overcome.