Can a settlement offer made during a grievance be "without prejudice"?

At the end of last year, in the Employment Appeal Tribunal (EAT) case of Garrod v Riverstone Management Ltd, the EAT upheld an employment judge’s decision that an employee’s grievance alleging bullying, harassment and maternity discrimination constituted an existing dispute for the purposes of the without prejudice rule. As a result, the employee was unable to refer to a settlement offer made during the grievance process in her legal claim. This blog explores the implications of this case in more detail.

The without prejudice rule

The without prejudice rule is aimed at preventing statements made in a genuine attempt to settle an existing dispute coming before a tribunal as evidence. Importantly, for the rule to apply, there must be a dispute at the time the without prejudice statements are made. This does not mean litigation has to have been threatened, but the parties must have contemplated, or might reasonably have contemplated, litigation if terms could not be agreed. When without prejudice privilege applies, it gives a party an absolute right to withhold a document from disclosure.

Last year we published a blog on Without Prejudice: when it will (and will not) apply, outlining the exceptions to the rule. This blog discussed the judgement in Swiss Re Corporate Solutions Ltd v Sommer, in which the judge found that there remained a strong rule of public policy for maintaining privilege for without prejudice correspondence. The recent decision of Garrod confirms that position in respect of the unambiguous impropriety exception, and provides us with some signposting as to when a dispute will amount to an existing dispute for the purposes of the without prejudice rule.

The facts

The employee, who was a company secretary for the employer, submitted a grievance in which she raised serious allegations against three senior managers (including pregnancy and maternity discrimination and bullying and harassment). The main aspect of her grievance was her assertion that her duties were changed when she returned from maternity leave.

The employee had a grievance meeting with the company’s external HR and employment law adviser. At the end of the meeting, the adviser said he would like to have a without prejudice conversation. The employee did not question or object to this and the adviser assumed that the employee understood the implications of such discussions as she had had some legal training. The adviser described the employment relationship as “fractured” and “problematic” and offered the employee £80,000 by way of settlement for her termination. No agreement was reached, the company rejected the employee’s grievance, and she ended up resigning.

The employee then brought claims of pregnancy / maternity discrimination, harassment and constructive dismissal, referring to the without prejudice meeting in her particulars of claim. The company argued that the references should be excluded based on the without prejudice rule.

Employment Tribunal Decision

At a preliminary hearing on the issue, the employment judge found that the without prejudice rule did apply. They were satisfied there was an existing dispute at the time of the meeting (even though litigation had not started at this point), as the parties might have reasonably contemplated that litigation would follow without settlement.

EAT Decision

The EAT considered previous case law on the question of whether there was an existing dispute, with previous decisions suggesting that simply raising a grievance with your employer does not prove the existence of a dispute, such as BNP Paribas v Mezzoterro. Mezzoterro was distinguished on the basis that in that case, the without prejudice meeting was at the heart of the claim (ie the claimant there argued that holding the meeting was an abuse of the rule) whereas in Garrod, the employee didn’t rely on the without prejudice meeting as an unlawful act.

The EAT concluded here that the employee had complained of various unlawful acts, therefore the ET was entitled to find that a dispute existed at the time of the grievance meeting. It noted that her grievance made references to the infringement of legal rights and Acas Early Conciliation and so provided “clear signposts to the possibility of litigation.” Further, the fact that the employee had had legal training was relevant as it meant it was reasonable to conclude that she meant what she said.

There was a further angle to this decision in that the employee argued that the settlement proposal was made to try and push her out of her job for discriminatory reasons and it was unambiguously improper for the company to tell her she had no future there. The EAT rejected the argument that the unambiguous impropriety exemption applied on the basis that previous case law made it clear it would on apply in “truly exceptional and needy circumstances” and here the situation fell far short of a scenario such as perjury or blackmail.

Where does this leave us?

After Mezzoterro, there was some doubt as to whether a grievance would be sufficient to be an existing dispute in order for the without prejudice rule to apply. This case shows that employers can (depending on the facts of the case) hold genuine without prejudice discussions with employees who have brought grievances in order to try and settle a grievance. This case also reinforces how difficult it is for parties to rely on exemptions to the without prejudice rule, such as “unambiguous impropriety”, highlighting the public policy reasons for protecting this very much enshrined rule in our legal repertoire.

For more information on without prejudice, and privilege more generally, see our briefing from our Disputes team: Privilege – the key developments in 2022.

If you require further information about anything covered in this blog, please contact Marianne Kemp or your usual contact at the firm on +44 (0)20 3375 7000.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, January 2023