An important case on when the without prejudice rule applies to employment discussions.

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Posted in:HR and Employment|February 10, 2014 | Join the mailing list

Portnykh & Prejudice – an important case on when the without prejudice rule applies to employment discussions.

In the recent case of Portnykh v Nomura International Plc UKEAT/2013/0448, the Employment Appeal Tribunal (EAT) examined the scope of "without prejudice" privilege in relation to discussions aimed at agreeing an employee’s exit from their employment.

Under new rules which came in to force on 29 July 2013, employers can have discussions with employees about a possible termination of employment settlement without the risk of those discussions coming to the attention of an employment tribunal in a subsequent
unfair dismissal claim. However in order for this to apply, the conversation has to be very carefully conducted and the new rules also don’t prevent the discussion being mentioned in claims for things over than straightforward unfair dismissal (such as discrimination
claims or claims falling within the categories of automatically unfair dismissal).

If a settlement discussion is on a “without prejudice” basis, then the protection provided is far wider, preventing the discussion from being repeated in any legal proceedings. However, in order for the without prejudice principle to apply, there needs already
to be a dispute between the employer and employee before the settlement discussion takes place.        

In the case mentioned above, Dr Portnykh was dismissed by his employer, Nomura, because the employer had decided that he was guilty of misconduct. During settlement negotiations between the parties (ostensibly conducted on a without prejudice basis), it was
agreed that the reason for the dismissal could be stated to be redundancy. However, when the settlement discussions did not result in a deal being concluded and when Dr Portnykh was then dismissed, he issued proceedings in the Employment Tribunal claiming
that the real reason for his dismissal was that he had made protected disclosures (in other words, he had blown the whistle).

At a preliminary hearing, the Tribunal said that Nomura could refer at the later main hearing to the "without prejudice" correspondence which there had been between the parties and which Nomura argued would show the real reason for the dismissal. Nomura argued
that there had not been a dispute between the parties at the time of that correspondence and that it was therefore not genuinely without prejudice.  
The EAT, overturning the Tribunal’s decision, found that there was a dispute (or at least a potential dispute) between the parties and that this was enough for the “without prejudice” principle to apply. The correspondence relating to the proposed dismissal
of Dr Portnykh and discussions surrounding a settlement agreement (including payment of a settlement sum) clearly pointed to there being a dispute.  The fact that the discussions and correspondence seemed amicable was irrelevant.

Although the decision went against the employer in this particular case, it does give some comfort to employers wanting to hold "without prejudice" termination negotiations before a dispute has actually arisen, but when there is at least a potential dispute
with the employee. It’s still very important, however, to handle these discussions with great care so as to minimise the risk of a legal claim.

For more information about any of the above or for practical commercial advice on this or any other aspect of employment law, please contact
Nigel Crebbin of the Berg Employment Team on 0161 833 9211 or email him at Follow us on Twitter:

(The information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Berg or any of its partners or employees. Professional legal advice should
be obtained before taking, or refraining from taking, any action as a result of this article.)

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