In the first appellate decision on the scope of settlement negotiations under s.111A Employment Rights Act 1996 (Faithorn Farrell Timms LLP v Bailey) (“Bailey”), the EAT has ruled that references to, and information relating to the conduct of, such negotiations were inadmissible.
Since 29 July 2013, parties have been able to use s.111A to ensure pre-termination negotiations for unfair dismissal claims are inadmissible in any subsequent Tribunal proceedings. This prevents a Tribunal considering evidence of ‘any offer made or discussions held’ with a view to terminating employment on agreed terms. The rationale (as with the ‘without prejudice’ rule) is to enable parties to discuss potential settlement openly without fear of repercussion if the settlement discussions break down.
In Bailey, the EAT (overturning the original ET decision) held that it is not just the content of the discussions which is inadmissible to the Tribunal, but also the mere fact these discussions were held in the first place. This includes discussions between the employer and employee, and internal discussions within the employer, for example between managers and HR advisers. The claimant, therefore, could not rely on these discussions in support of her unfair dismissal claim.
111A is different to the common law ‘without prejudice’ rule in a number of key aspects:
- Unlike ‘without prejudice’ discussions, privilege under s.111A cannot be waived, even with the consent of both parties.
- As mentioned above, s.111A applies only to unfair dismissal cases.
- S.111A can apply even where there is no dispute at the time of the discussions. The ‘without prejudice’ rule only applies where there is an existing dispute between the parties.
- Unlike the ‘without prejudice’ rule, which can only be disregarded by the Tribunal if there is ‘unambiguous impropriety’ by a party, s.111A may not apply if there is ‘improper behaviour’ (which gives a wider discretion to the Tribunal).
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A number of questions remain unanswered following the judgment and we will wait to see if clarity is brought at a later point. Practical difficulties will arise where (as in Bailey) another claim, such as discrimination arises in addition to the unfair dismissal, as the protection of s.111A only allows the evidence to be inadmissible for the unfair dismissal part of the claim. Also, the EAT did not consider whether s.111A applies if no offer of settlement is made.
The case has been sent back to the Tribunal to determine whether there was any ‘improper behaviour’ under the exemptions to s.111A.
