Confidentiality of settlement discussions with employees clarified

Since July 2013, evidence of pre-termination negotiations has been inadmissible in unfair dismissal claims. This means that confidential…

Since July 2013, evidence of pre-termination negotiations has been inadmissible in unfair dismissal claims. This means that confidential discussions, conducted with a view to ending employment on agreed terms, cannot be referred to in evidence by either party. In Faithorn Farrell Timms LLP v Bailey the Employment Appeal Tribunal has delivered the first appeal decision on this issue, which provides some helpful guidance on the scope and meaning of the pre-termination negotiation rules.

What happened?

Mrs Bailey worked part time, but alleged that it was made clear to her that this was no longer an option. She initiated discussions about a settlement agreement and various letters marked ‘without prejudice’ were exchanged with her employer. However, ultimately, the negotiations were unsuccessful. Mrs Bailey later raised an internal grievance referring to the settlement discussions and they were also referred to within the grievance process by both Mrs Bailey and her employer.

After she resigned, Mrs Bailey claimed constructive dismissal and sex discrimination and referred to the settlement discussions in the claim form. The Employment Tribunal, and subsequently the EAT, was asked to identify, as a preliminary issue, which documents could be considered when the claim is heard.

The decision

The EAT revisited the interaction between the ‘without prejudice’ rules (which have existed for many years and are derived from case-law) and the newer rules on pre-termination negotiations (set out in s111A Employment Rights Act). The Judgment reminds us that, although they are closely related, the rules that apply are slightly different.

A key difference is that, for without prejudice principles to apply, the parties must be in dispute (which has always been one of the difficulties in trying to start negotiations with an employee you wish to exit). This is not the case for pre-termination negotiations which remain confidential whenever they take place. However the latter applies to unfair dismissal claims only and not to other types of claim.

The EAT’s Judgment has clarified the following important points:

  • Protection applies not only to the terms of the offer made, but also to the fact that there have been pre-termination negotiations and to everything that was actually said during those discussions;
  • Protection extends further to include internal correspondence and communications which deal with the pre-termination negotiations, such as communications between managers or between management and HR;
  • The parties cannot decide or agree to waive protection under the pre-termination negotiation rules (as these are set out in statute and the wording carefully chosen by Parliament does not allow for this), unlike the position under the 'without prejudice' rules; and
  • In a claim which combines both unfair dismissal and something else (such as discrimination), evidence relating to pre-termination negotiations can be separated out and used to support the other claim whilst being ignored for the purposes of the unfair dismissal claim.

What does this mean for me?

The decision confirms that pre-termination negotiations are protected and some of the points above will be helpful when making such an approach. However there are some additional factors to bear in mind when initiating pre-termination negotiations:

If the protection relating to pre-termination negotiation discussions cannot be waived, employees cannot seek to rely in Tribunal on what was said, even if you mention the discussion in other internal documents and meetings. However, this rule also works the other way round and prevents you from relying on statements made in pre-termination negotiations as evidence, even if you feel it might be helpful for you to do so.

The EAT pointed out that, if the parties are not permitted to refer to pre-termination negotiations, this may leave an unexplained gap in correspondence between the parties. This is important because it means that, if you focus on resolving matters through negotiation, you might find that in Tribunal it erroneously looks like you stopped engaging with the employee for some time. For this reason, it is important to keep up day to day open correspondence with the employee, even while your discussions about their possible exit are taking place.

These arguments could largely have been avoided if the employer had clearly distinguished between settlement discussions and other matters and had objected when reference to settlement discussions were made during the grievance. If in doubt about this do take advice, particularly if the employee refers to a confidential discussion in another context. Hopefully this will avoid later arguments about admissibility of evidence.


This Judgment is in many ways reassuring as it makes much clearer the parameters of the confidentiality rules surrounding pre-termination negotiations. In particular, it is welcome news that correspondence between managers and HR about an offer is likely to remain confidential. The decision pragmatically acknowledges that pre-termination discussions do not take place in a vacuum and may involve multiple advisors and decision makers.

Do also remember that, even though the rules on pre-termination negotiations keep most such conversations confidential, it remains the case that protection may be lost if there is improper behaviour. It is as important as ever to be mindful of what you say and to negotiate sensitively and with caution.

It is very important to plan carefully before initiating settlement discussions. How an offer is introduced is often the most important factor in the chances of it being well received. Take early advice about what you are offering, how you frame such discussions, and how you refer to them in correspondence.

Phil Allen ( is a Partner in the Employment Pensions and Immigration team and is based in Manchester. If you have any questions please get in touch with Phil or speak to your usual Weightmans contact.

Share on Twitter