Will Clift discusses the recent Employment Appeal Tribunal case of Scheldebouw v Evanson, in which the EAT upheld a Tribunal’s decision that a conversation during which the terms of a Settlement Agreement were discussed was not subject to without prejudice privilege, and could therefore be referred to in Employment Tribunal proceedings.
Mr Evanson was employed as Scheldebouw BV’s Chief Risk Officer. In October 2018, the Company decided to remove Mr Evanson’s role. On 12 October 2018, the parties met to discuss the termination of Mr Evanson’s employment. They agreed all of the terms of his dismissal, (including an enhanced redundancy payment) apart from holiday pay. None of the attendees at the meeting referred to it as being “without prejudice”. At the meeting, Mr Evanson and the Company agreed to enter into a Settlement Agreement.
However, the discussions ultimately broke down and no agreement was reached. Mr Evanson later brought a claim for unlawful deduction from wages in respect of his holiday pay. In his claim, he referred to the offer made by the Company during the meeting on 12 October 2018. The Company argued that this conversation was subject to without prejudice privilege and could not be referred to in the proceedings.
The Employment Tribunal’s decision
In making its decision on this point, the Employment Tribunal referred to the Court of Appeal’s decision in Barnetson v Framlington Group, in which the Court decided that, when deciding if a discussion or communication is subject to without prejudice privilege, the key question is whether, in the course of the negotiations in question, the parties contemplated, or might reasonably have contemplated, that the matter would result in legal proceedings if an agreement could not be reached.
Applying this rule, the Tribunal decided that the conversation was not subject to without prejudice privilege. The Company appealed the decision on a number of grounds.
The Employment Appeal Tribunal’s decision
The Employment Appeal Tribunal (EAT) upheld the Tribunal’s decision, and agreed with its conclusion that, at the time of the meeting on 12 October 2018, the parties did not contemplate, and would not reasonably have contemplated, that the discussions would result in legal proceedings if an agreement could not be reached. The EAT made a number of findings in support of reaching this conclusion, including:
- At the time of the meeting, the only major area of disagreement between the parties was the narrow issue of holiday pay.
- There was no dispute between the parties during the meeting, and the majority of the terms were agreed, meaning there was no reason to believe that the matter would end in a dispute.
- The terms reached in the meeting were described as a “gentleman’s agreement”.
- The Company’s proposal that Mr Evanson should enter into a Settlement Agreement did not indicate that it was contemplating the possibility of litigation – this was simply suggested as a sensible commercial precaution.
- Neither the Company nor Mr Evanson referred to the meeting as “without prejudice”
- The Company did not take legal advice in relation to Mr Evanson’s departure.
Lessons for employers
It is noteworthy that the Tribunal and the EAT did not consider that the parties’ agreement (reached during the meeting) to enter into a settlement agreement indicated they believed that there was a prospect of the matter ending in litigation. This highlights the importance of not assuming that, simply because you are discussing agreed departure terms with an employee, those discussions will be subject to without prejudice privilege – there must be a dispute in existence (or a reasonable prospect of a dispute) for without prejudice privilege to apply. Employers should therefore (to the extent possible) take care not to say (or write) anything during such discussions which could damage their defence to any claim that an employee may bring at a later date.
Employers would also be well advised to, where possible, try and rely on the provisions within section 111A of the Employment Rights Act, under which the parties are prevented from referring to “pre-termination negotiations” in any later ordinary unfair dismissal Tribunal proceedings. Whilst these provisions can only be relied on in ordinary unfair dismissal claims (and so cannot, for example, be relied on in any discrimination claim), and are subject to other limitations, they can provide protection in circumstances where without prejudice privilege does not apply.