News Updates

Settlement negotiations

Thursday 21st July 2016

Faithorn Farrell Timms LLP v Bailey is the first EAT decision on section 111A of the ERA 1996, which introduced the concept of pre-termination negotiation (PTN) to provide greater flexibility for employers and employees to confidentially discuss termination arrangements.

A PTN is “any offer made or discussions held, before the termination of the employment in question, with a view to it being termination on terms agreed between the employer and employee.” An existing dispute is not required, as is generally the case for without prejudice privilege.  A PTN is generally inadmissible in unfair dismissal proceedings, unless the dismissal is automatically unfair or there has been improper conduct. Section 111A does not apply to discrimination claims.

Mrs Bailey alleged that FFT informed her that she could no longer work part-time. She initiated discussions about a settlement agreement and the parties exchanged without prejudice correspondence. Ultimately, Mrs Bailey lodged a grievance and then brought claims for unfair constructive dismissal and sex discrimination, referring to the settlement discussions. FFT did not object and also referred to the discussions in its response. However, FFT raised the admissibility point during preparation for the hearing.

The ET held that section 111A only applied to the details of any offers made or discussions held and not to their existence. FFT appealed arguing that the ET’s interpretation was too restrictive and that all of the correspondence was privileged as without prejudice. Mrs Bailey cross-appealed arguing that any privilege had been waived and that the ET had failed to deal with her allegations of unambiguous impropriety/improper behaviour by FFT.

The EAT held that:

  • Section 111A applies to the content of a PTN and the fact that there have been such offers or discussions.

  • Internal employer discussions about the PTN are inadmissible under section 111A.

  • Section 111A privilege cannot be waived.

  • Improper behaviour is a broader concept than unambiguous impropriety under the common law.  

The EAT held that FFT had waived without prejudice privilege and remitted the case back to the ET to determine if there had been improper behaviour by FFT.

All information in this update is intended for general guidance only and is not intended to be comprehensive, or to provide legal advice.