What Does "Without Prejudice" Mean?

The phrase without prejudice is commonly used during settlement negotiations.

In employment disputes, it broadly means that genuine settlement discussions can be conducted confidentially so that statements, admissions and offers made during those negotiations cannot normally later be relied upon as evidence in an Employment Tribunal or court.

The purpose of the rule is to encourage parties to negotiate openly and attempt to resolve disputes without worrying that a genuine settlement proposal will later be used against them.

It is important, however, to understand that simply writing "without prejudice" on an email or letter does not automatically make the communication confidential or inadmissible.

The legal requirements for the without-prejudice rule must still be satisfied.

When Does the Without-Prejudice Rule Apply?

For the ordinary without-prejudice rule to apply, there will generally need to be:

• An Existing dispute between the parties
• A Genuine attempt to settle that dispute
• No Unambiguous impropriety in the negotiations

The rule is a common-law principle rather than a special rule limited to employment cases.

It can therefore potentially apply to disputes involving matters such as unfair dismissal, discrimination, breach of contract and unpaid wages.

How is Without Prejudice Used in Employment Disputes?

Employers and employees frequently use without-prejudice discussions when they are trying to resolve an existing workplace dispute.

For example, an employee may have already raised allegations concerning discrimination, dismissal, unpaid wages or breach of contract.

The parties may then discuss whether the dispute could be resolved by agreement rather than through Employment Tribunal or court proceedings.

A written communication may be headed:

Without Prejudice

A meeting or telephone discussion may also be identified as being conducted on a without-prejudice basis.

However, the wording itself is not decisive.

A communication that genuinely satisfies the legal test can potentially be protected even if the words "without prejudice" were not used.

Likewise, marking an ordinary workplace communication "without prejudice" will not create protection where the legal requirements are not satisfied.

What is the Purpose of Without-Prejudice Protection?

Settlement negotiations frequently involve compromises that a party would not make if the dispute proceeded to a final hearing.

For example, an employer might offer compensation without accepting that it has acted unlawfully.

An employee might agree to accept less than the full value of a claim in return for a prompt settlement and an agreed reference.

Without-prejudice protection allows those discussions to take place without the settlement offer itself normally being treated as an admission of legal liability.

If negotiations fail, the parties can generally continue with the underlying dispute without relying on the protected settlement discussions as evidence.

Does Every Communication During a Dispute Become Without Prejudice?

No.

There must be a genuine attempt to resolve the dispute.

For example, an employee may send an open letter explaining:

• What happened
• Why they believe the employer acted unlawfully
• What outcome they are seeking through a grievance

That letter does not automatically become without prejudice merely because a dispute exists.

If the employee subsequently makes a genuine settlement proposal, the negotiations concerning that proposal may potentially attract without-prejudice protection.

A communication can sometimes contain both factual material and settlement-related material, and questions can arise over which parts are protected.

Ultimately, if the parties disagree about whether a communication is admissible, the Tribunal or court can determine whether the without-prejudice rule applies.

Does There Need to Be an Existing Dispute?

Yes, for the ordinary without-prejudice rule.

There must generally already be a dispute between the parties at the time of the settlement communication.

An Employment Tribunal claim does not need to have been formally issued.

For example, an existing dispute might arise where an employee has raised a legal complaint and is reasonably considering proceedings.

However, an ordinary workplace difficulty will not necessarily amount to an existing legal dispute.

For example, if an employer unexpectedly approaches an employee who has never previously been told that there is a problem and immediately offers money for them to leave, the ordinary without-prejudice rule may not apply.

In that situation, the separate statutory protection under section 111A of the Employment Rights Act 1996 may potentially apply.

Does the Existing-Dispute Rule Only Apply to Discrimination and Contract Claims?

No.

The existing-dispute requirement is part of the ordinary without-prejudice principle generally.

It is therefore relevant to unfair dismissal disputes as well as discrimination, contract and other claims.

The reason unfair dismissal cases can sometimes be different is that section 111A creates a separate statutory form of confidentiality for certain pre-termination negotiations even where no dispute already exists.

What is a Protected Conversation?

Section 111A of the Employment Rights Act 1996 allows an employer and employee to have confidential pre-termination negotiations about ending employment on agreed terms.

These discussions are often referred to as:

Protected conversations

Unlike the ordinary without-prejudice rule, section 111A can potentially apply even where there was no existing dispute before the settlement proposal was made.

For further guidance, see Protected Conversations.

What Claims Does Section 111A Protect Against?

Section 111A is much narrower than the ordinary without-prejudice rule.

Its confidentiality protection principally applies to evidence in ordinary unfair dismissal proceedings.

It does not provide the same protection for claims such as discrimination, whistleblowing, automatically unfair dismissal or ordinary breach-of-contract claims.

For example, an employer might unexpectedly offer an employee a settlement agreement where no previous dispute existed.

The discussion could potentially be protected from being used in a later ordinary unfair dismissal claim under section 111A.

However, if the employee alleges that the offer itself was discriminatory, section 111A would not automatically prevent the discussion from being relied upon in the discrimination claim.

Can Without Prejudice and Section 111A Apply at the Same Time?

Yes.

Where there is already an employment dispute and the parties discuss settlement before employment ends, the negotiations can potentially be covered by both:

The common-law without-prejudice rule

and

Section 111A of the Employment Rights Act 1996

However, the two protections are not identical.

The without-prejudice rule can potentially apply to a much wider range of claims but normally requires an existing dispute.

Section 111A does not require an existing dispute, but its protection is principally limited to ordinary unfair dismissal proceedings.

What Can Cause Without-Prejudice Protection to Be Lost?

The ordinary without-prejudice rule does not protect communications involving unambiguous impropriety.

This is a high threshold involving serious misuse of the settlement process.

Examples can potentially include blackmail, fraud, perjury or serious threats.

The exception is deliberately narrow.

A party making a firm settlement offer, rejecting an offer or taking a strong negotiating position will not normally amount to unambiguous impropriety by itself.

What is "Improper Behaviour" Under Section 111A?

Section 111A uses a different concept known as improper behaviour.

Where improper behaviour occurs during pre-termination negotiations, the protection can be lost to the extent that the Employment Tribunal considers it just.

Acas gives examples that can include bullying, intimidation, discrimination, victimisation, physical threats and undue pressure.

One form of undue pressure can arise where an employer tells an employee, before any disciplinary process has started, that they will definitely be dismissed if they refuse the settlement offer.

This is different from neutrally explaining that a disciplinary or performance process may follow if settlement cannot be reached.

How Much Time Should I Be Given to Consider a Settlement Offer?

There is no automatic statutory cooling-off period that applies to every settlement proposal.

However, the Acas Code of Practice on Settlement Agreements recommends that employees should generally be allowed at least:

10 calendar days

to consider the formal written terms and obtain independent advice, unless the parties agree otherwise.

What is reasonable can depend on the circumstances.

An employee may require more time, for example where a reasonable adjustment is required because of disability.

Providing inadequate time can potentially be relevant when deciding whether undue pressure or improper behaviour occurred.

Can My Employer Make a Settlement Proposal During a Redundancy Process?

Yes.

An employer can propose an agreed termination package while a Redundancy process is taking place.

For example, the employer might offer:

• Statutory redundancy entitlements
• Additional compensation
• Notice arrangements
• An Agreed reference

in return for the employee entering into a settlement agreement.

Making such an offer does not automatically mean that the redundancy process is unlawful or predetermined.

However, a settlement proposal does not remove the employer's underlying legal obligations if no agreement is reached.

If the employee rejects the offer, the employer should still comply with any applicable:

• Redundancy consultation duties
• Fair selection requirements
• Collective consultation obligations

A settlement agreement can resolve identified claims if it is validly entered into, but merely making an offer does not retrospectively make an unfair redundancy process lawful.

What Happens if I Reject a Settlement Offer?

A settlement agreement is voluntary.

You are not required to accept it.

You can:

• Accept the proposal
• Reject it
• Make a counter-offer
• Continue negotiating

If no settlement is reached, the underlying employment process or dispute can normally continue.

For example, an employer might continue with a genuine:

• Performance procedure
• Disciplinary procedure
• Redundancy process

The fact that a more generous settlement package was previously offered does not necessarily mean that the same additional payment must later be offered if the ordinary employment process continues.

What Does "Without Prejudice and Subject to Contract" Mean?

These expressions perform different functions.

Without prejudice concerns whether settlement negotiations can normally be used as evidence in legal proceedings.

Subject to contract concerns whether the parties have already entered into a binding agreement.

In England and Wales, marking proposed settlement terms subject to contract generally indicates that the parties do not intend the proposed settlement agreement to become legally binding until the formal agreement has been completed and signed.

This allows the parties to negotiate matters such as:

• Compensation
• Notice
• Termination date
• Reference wording
• Confidentiality
• Tax treatment
• Restrictive covenants
• Legal fees

before the final agreement becomes binding.

Is "Subject to Contract" the Same in Scotland?

Not necessarily.

The contractual position in Scotland can differ from England and Wales.

Acas guidance warns that even where negotiations are marked subject to contract, a binding agreement may potentially arise under Scots law if the parties have already agreed the essential terms.

The legal effect of negotiations should therefore be considered carefully where Scots law applies.

Does Agreeing a Settlement Offer Immediately Create a Valid Settlement Agreement?

Not necessarily.

A statutory settlement agreement must satisfy specific legal requirements before relevant statutory employment claims can be validly waived.

Among other requirements, the agreement must be in writing and relate to the particular complaint or proceedings being settled.

The employee or worker must also receive advice from a qualifying independent adviser about the agreement and its effect on their ability to pursue the relevant claims.

The adviser must be identified in the agreement and must have appropriate insurance or indemnity cover.

For further guidance, see Settlement Agreements.

Do I Have to Take Independent Legal Advice?

If a settlement agreement is being used to validly waive the relevant statutory employment claims, independent advice is legally required.

The adviser may be, depending on the statutory requirements:

• A Qualified lawyer
• An Appropriately certified trade union adviser
• An Appropriately certified advice-centre worker

The employer will commonly offer a contribution towards the cost of obtaining independent advice, although there is no general statutory rule requiring the employer to pay the employee's legal fees.

Can Settlement Discussions Include Confidentiality Clauses?

Yes.

A settlement agreement may contain confidentiality provisions dealing with matters such as:

• The Terms of the settlement
• Confidential business information
• Appropriate restrictions on disclosure

However, a settlement agreement and an NDA are not the same thing.

A confidentiality clause is only one possible term within a wider settlement agreement.

Confidentiality wording must also comply with applicable statutory protections and cannot lawfully prevent disclosures that legislation protects.

Should I Assume a Conversation is Definitely Off the Record?

No.

This is one of the most important practical points.

The expressions:

Without prejudice

and

Protected conversation

should not be treated as magic words.

Whether a discussion can later be used in evidence depends on matters including:

• Whether an existing dispute existed
• Whether there was a genuine attempt to settle it
• What type of legal claim is later brought
• Whether section 111A applies
• Whether improper behaviour occurred
• Whether there was unambiguous impropriety

A discussion can therefore be protected for one legal claim but potentially admissible in another.

Where settlement negotiations involve significant discrimination, whistleblowing, contractual or dismissal issues, the precise basis of confidentiality should be considered before assuming that everything said is legally off the record.