UK: First EAT ruling on protected settlement discussions

From July 2013 evidence of pre-termination negotiations has been inadmissible in ordinary unfair dismissal claims (see here for further details). This protection was introduced with the aim of enabling employers to hold termination settlement discussions prior to starting a disciplinary or performance management process. In its first ruling on this provision, the EAT in Faithorn Farrell Timms v Bailey has held that:

• the inadmissibility applies to the fact of negotiations as well as the content (whereas the fact, but not the content, of without prejudice negotiations may be admissible)
• the inadmissibility covers discussions within the employer, eg, between managers and HR
• the inadmissibility cannot be waived, even if both parties agree (in contrast, without prejudice protection can be waived, and employers may inadvertently do so if they fail to object to an employee's open reference to without prejudice material, eg, in an ET1)
• the exception for 'improper behaviour' is wider than the 'unambiguous impropriety' exception to without prejudice protection.

The EAT left open the question of whether the protection can apply to negotiations if the employer does not ultimately make an offer.

It is perhaps unsurprising that this provision has not come before the EAT previously. Although it can apply earlier than without prejudice protection (which can only be relied on once there is a live "dispute"), its usefulness is limited by the fact that the inadmissibility does not apply to an automatically unfair dismissal or discrimination claim, and few employers are likely to be in a position to discount the possibility of such claims. It is of course best practice to avoid making incriminating remarks or unhelpful admissions during negotiations in the first place, so that there is no need to argue inadmissibility. Employers should also ensure a clear divide is maintained between matters suitable for open correspondence and those which may benefit from statutory or without prejudice protection. Where negotiations are protracted, employers may want to maintain separate open correspondence to demonstrate ongoing communication and explain delays in dealing with disciplinary or grievance issues.