At what point does “without prejudice” privilege cover your communication with an employee?

The recent Scheldebouw B.V v Mr. Martin Evanson case made interesting reading for many business owners and HR professionals.

Especially, when it emerged the Employment Appeal Tribunal (EAT) held that the Employment Judge had not made an error when deciding that an offer made by an employer concerning outstanding holiday pay was not protected by “without prejudice” privilege.

Employers often mark communication with employees or tell the employee that their communication is “without prejudice” during settlement negotiations. This is because “without prejudice” privilege prevents the contents of settlement negotiations from being later relied on in court.

However, this case is a prime example that not all communication as part of negotiations is protected by “without prejudice” privilege.

Summary of Scheldebouw B.V v Mr Martin Evanson:

The claim related to unlawful deduction from wages, however the issue being heard at the EAT was in relation to the Employment Tribunal’s ruling to not redact from the Claim Form a passage which the Respondent argued was covered by “without prejudice” privilege.

The passage referred to discussions held between the Claimant and Respondent to attempt to amicably resolve the issues of his outstanding holiday entitlement and specifically referenced the Respondent’s offer on 12 October 2018, and the Claimant’s counter-offer on 17 December 2018, and that those negotiations ultimately ended up breaking down.

The Claimant accepted that the part of the passage referring to his counter-offer was “without prejudice” and should be redacted. This was in the Claimant’s interest as it meant that the Employment Tribunal was not aware of the amount of holiday pay the Claimant was willing to accept in negotiations.

However, the Claimant did not believe that the remainder of the passage, and the Respondent’s offer, was covered “without prejudice”. It of course would not suit the Respondent for the Employment Tribunal to be aware of the amount they were willing to pay in negotiations.

The Respondent and the Claimant met on 12 October 2018 to discuss the termination of his employment and the related financial matters. His employment was being terminated simply due to there no longer being a need for the Claimant’s services. This was not in dispute.

At the meeting the Respondent suggested what it would pay for accrued holiday pay and put forward an amount. The correspondence that followed was not marked “without prejudice”.

At the start of December 2018 the Respondent provided the Claimant with a draft settlement agreement. The Claimant responded on 17 December 2018 with a counter-settlement agreement. An agreement was not reached and the Claimant was dismissed on 19 March 2019, with the holiday pay dispute still unresolved.

The Employment Judge held that the discussions and correspondence that took place before December 2018 were not “without prejudice” as the parties were not in dispute at this stage. The Employment Judge found that both parties considered that an amicable conclusion would be reached.

There is always some theoretical risk of litigation, however the Employment Judge concluded that the Respondent had a draft settlement agreement drawn up not in fear of litigation but because it made commercial sense; as they were parting with a large sum of money and wanted to ensure in return any lose ends relating to the employee’s employment were tied up.

Therefore, the Employment Judge did not agree that the passage should be redacted except for the Claimant’s counter-proposal, as at the point of making a counter-proposal litigation was reasonably contemplated, and so was covered by “without prejudice” privilege.

A quick refresher on “without prejudice” privilege:

“Without prejudice” privilege is relied on to prevent the content of settlement negotiations later being relied on in court.

The leading case is Barnetson v Framlington Group. This case identified that the central question as to whether communication is protected by “without prejudice” privilege is whether, at the relevant stage in negotiations, the parties contemplated or might reasonably have contemplated litigation if they could not agree.

This is based on public policy that parties should be encouraged to settle their disputes without resorting to litigation and as such they should be able to speak freely. Therefore, written or oral communications made in a genuine attempt to settle a dispute between the parties will be covered by “without prejudice” privilege.

Businesses often believe that communication marked “without prejudice” will be protected. However, marking a document “without prejudice” does not mean that it will automatically be protected. Similarly, a document may still be covered by the “without prejudice” privilege, even if the words “without prejudice” are not used.

The test the court will apply is an objective one. They have to decide on a reasonable basis what the intention of the parties was at the time, and whether they contemplated or might reasonably have contemplated litigation if they could not agree.

The matter is therefore highly case-sensitive and unfortunately it is not straightforward enough to simply mark a document “without prejudice” or say a conversation is protected.

Written by Emily Warman .