EAT underlines limits of the “without prejudice” rule

Two cases are analysed this month, one of which from an employer’s viewpoint is a cautionary tale and the other of which provides some welcome assurance.

A recent decision of the Employment Appeal Tribunal, in a case called BNP Paribas v Mezzotero has highlighted the limits of what is generally known as the “without prejudice” rule. This is an important case for employers to take on board where problems or issues arise with employees which are not likely to lead directly to termination of the relationship but indirectly give rise to that possibility.

The ‘without prejudice’ rule is a well established principle, based upon public policy, which applies to all types of litigation. In effect what it means is that the parties to a dispute are at liberty to have full and frank discussions about resolving the dispute without those discussions subsequently being relied upon in legal proceedings if the dispute cannot be resolved. For the rule to apply, however, there has to be a genuine dispute between the parties and the negotiations or discussions sought to be protected from disclosure have to be aimed at the resolution of that dispute.

In the Paribas case, the EAT has reaffirmed that it is only negotiations directly related to the area of dispute between the parties which are “without prejudice” and protected from disclosure.

The brief facts were that the employee lodged a grievance with her employers as to her treatment upon return from maternity leave effectively suggesting that she had been directly or indirectly discriminated against on the grounds of her sex. Subsequent to that at a meeting which the employers described as ‘without prejudice’, the employers suggested that in effect the best course was for the parties to agree a termination on the basis of a compromise agreement. The employee subsequently presented a complaint to the Tribunal alleging sex discrimination and victimisation. One of her specific complaints of victimisation was that she was threatened with termination of employment at the ‘without prejudice’ meeting. The employers objected to the reference to ‘without prejudice’ discussions and the point went to a preliminary hearing at the Employment Appeal Tribunal to determine whether the employee was properly entitled to refer to the meeting as part of her case.

The employers argued that either there was a dispute between the parties as to the termination of employment or alternatively that the issue of termination was so intertwined with the grievance issue that “without prejudice” protection should be applied to discussions about it. The employee said that although she accepted the employers had made some passing reference to termination of employment, the real dispute between the parties was about continuing, rather than ending the employment relationship.

The EAT held that the act of raising a grievance does not necessarily mean that there is a dispute between the parties as grievance procedures are well recognised and used in the workplace and will often result in a solution being found so that the parties are never actually in dispute. Effectively on the facts of this particular case the Employment Appeal Tribunal decided that the grievance did not relate to a decision having been taken to terminate employment but quite the reverse that the employee wished to retain her position. Consequently there was no dispute between the parties as to termination of employment and the ‘without prejudice’ meeting could not therefore have been a genuine attempt to compromise a dispute which did not exist. Therefore, the contents of the ‘without prejudice’ meeting were permitted to be used in evidence.

Comment

This decision does not raise any new points of principle and is based very much on the factual scenario which arose. It does, however, serve to underline that there are limits to the ambit of the without prejudice rule and stresses that the rule will only apply where there is a genuine dispute between the parties and the discussions are on their true construction aimed at resolving that dispute.

Employers will need to be wary about what they say to staff in situations where there are seemingly discrete issues between them but which could lead on to consideration of the whole employment relationship. Comments about termination as a means of resolution may not be protected from disclosure and could put the employer in difficulties where they might amount to harassment or victimisation.

A duty to safeguard an Employee’s economic wellbeing?

It is recognised that in certain defined circumstances an employer might owe a duty of care in relation to an employee's economic wellbeing. Thus for example, in the case of Spring v Guardian Assurance plc the House of Lords held that employers owed a duty of care to an employee in relation to the provision of a reference and in another House of Lords case of Scally v Southern Health and Social Services Board it was held that there was an implied obligation on the part of the employer to take reasonable steps to bring to the attention of the employee doctors in question their contractual right to purchase additional years pension entitlement. However, in the recent case of Crossley v Faithful and Gould Holdings Limited the Court of Appeal has held that there is no general implied term in a contract of employment for the employer to take reasonable care for the employee’s economic wellbeing.

The brief facts of the Crossley case were that a senior employee, who was also a director, suffered a nervous breakdown and a lengthy period of sickness absence. Eventually on the advice of his doctors he asked the employer to grant early ill-health retirement. This was agreed and the employment was terminated on ill-health grounds. One of the benefits of the contract of employment was membership of a permanent health insurance scheme which provided for payment of benefits so long as the employee remained in employment but in the event of termination benefit would only be payable at the insurer’s discretion. The insurer exercised its discretion to make payment for a period after termination but then ceased to make further payment. The employee sued his employer alleging breach of an implied term to take reasonable care for his economic wellbeing. The claim was rejected by the High Court and on appeal also by the Court of Appeal.

The Court of Appeal held that there was no general obligation to look after the employee’s economic wellbeing in a contract of employment, nor did such an obligation arise under any existing well recognised implied term. The Court decided that it could not impose such a wide ranging term when the House of Lords had not done so in Scally nor in Spring and it also expressed the view that the term proposed of an obligation to care for the employee’s economic wellbeing would impose an unfair and unreasonable burden upon employers.

The terms to be implied from the Spring and Scally cases were limited to those specific types of case and did not indicate a wider term as contended for by the employee. In any event, the employee in Crossley in view of his experience and status could reasonably have been expected to be aware of the terms of the PHI scheme and had been offered the facility of advice about his position which he had chosen not to take up.

Comment

This is a clearly a welcome decision for employers both in terms of the finding that employers are not their employees financial guardians save in the the specific Scally or Spring-type situations. From a wider perspective, it is also welcome in indicating the reluctance of the higher courts to extend the ambit of implied obligations on the part of an employer.

If you would like further information please do not hesitate to contact Kevin McKernan, Head of Employment Unit at Crutes Law Firm.

« Back to Newsletter archives