Your sales manager has been performing poorly recently and you have decided that it is probably time for you and he to part company. You have not discussed this with him and you do not want to have to go through your performance improvement procedure. You are prepared to pay him off, and you call him in to discuss matters. Sound familiar? If so, beware: you could land yourself in a lot of trouble if you try to short-circuit matters by having such a discussion.
Constructive unfair dismissal:
Billington v Michael Hunter & Sons
The first trap into which the unwary employer can fall is a claim of constructive unfair dismissal. If an employer threatens to dismiss an employee if the employee does not resign then, unless the employer can establish that it had good grounds for acting in this way, it will be in breach of the duty to maintain trust and confidence and the employee will be able to resign and claim constructive unfair dismissal.
In the recent case of Billington v Michael Hunter & Sons Ltd EAT/0578/03/D, an employee who had been given a disciplinary warning was subsequently summoned to another meeting to review her performance. The employer said that, if there were any further incidents of misconduct or poor performance, she would be dismissed. The employer pointed out that it would not be in her interests to have a dismissal on her CV and offered her the opportunity to resign on favourable terms. The employee subsequently resigned and brought a claim of constructive unfair dismissal in the employment tribunal. The Employment Appeal Tribunal (EAT) upheld the employee’s appeal and found that, in the circumstances, the suggestion that the employee resign was clearly a ‘vote of no confidence’ in the employee.
In light of the Billington case, employers should think carefully before seeking to short-circuit their disciplinary or poor performance procedures by suggesting an employee resign, even if they are prepared to offer a financial incentive for the employee to leave.
The ‘without prejudice’ rule
Of course, in the Billington case the employer did not say the discussions were ‘without prejudice’. Had it done so, it would have been in a better position because the general rule is that such discussions cannot be referred to openly. Where the ‘without prejudice’ rule applies, communications between parties are privileged and cannot be admitted in evidence in subsequent proceedings. The idea is that this allows the parties to discuss possible compromises without the threat of any concessions which they may make during such discussions being used in court against them, if they fail to settle.
Scope and application of the ‘without prejudice’ rule:
BNP Paribas Mezzotero
However, in another recent case, BNP Paribas Mezzotero EAT/0218/04/RN, the scope of the ‘without prejudice’ rule was examined for the first time in an employment law context. In this case the employee raised a grievance about how she was being treated prior to and on her return from maternity leave.
She claimed she had been singled out for demotion and publicly humiliated. She was then called into a meeting which her employer told her, as she entered the room, was to be ‘without prejudice’.
The employer said the meeting was independent of her grievance and then explained it was not possible for her to return to her old job, that there was no alternative employment and that it was best for both parties if her employment was terminated. She was told her departure would be regarded as a redundancy and she was offered a redundancy package. The employee declined the offer and subsequently brought a claim of victimisation under the sex discrimination legislation, relying on what was said at the ‘without prejudice’ meeting.
The tribunal held that the ‘without prejudice’ meeting had not been genuinely aimed at settling the grievance but was intended to result in the termination of the employee’s employment. In the circumstances, it would be an abuse of the “without prejudice” rule to exclude details of the meeting.
The employer appealed to the EAT which dismissed the appeal and repeated that, for the ‘without prejudice’ rule to apply, there must be a dispute between the parties when the “without prejudice” discussion takes place and that the communications to which the rule is said to attach must be a genuine attempt to settle that dispute. The EAT said that the fact that there was an outstanding grievance in this case did not mean that the parties were necessarily in dispute: a grievance might be upheld or dismissed for reasons the employee accepts, in which case the parties would never reach the stage when they could properly be said to be in dispute.
The EAT also held that, given the unequal relationship of the parties, the vulnerable position of the employee at the meeting and the fact that the employer had only suggested that the meeting be ‘without prejudice’ at the start of the meeting, it was unrealistic to take the view that they had agreed to talk ‘without prejudice’.
Finally, the EAT held that even if there had been a dispute between the parties which the meeting had attempted to settle, this case would have fallen within the exception to the ‘without prejudice’ rule for cases of unambiguous impropriety. This exception prevents the rule from applying where the exclusion of the evidence would cover up ‘perjury, blackmail or other unambiguous impropriety’. The EAT commented that the sex and race discrimination legislation sought to prevent discrimination and it was therefore in the public interest that all allegations of unlawful discrimination be heard and properly adjudicated upon. Remarks which were alleged to be discriminatory could not therefore be excluded from the admissible evidence by the ‘without prejudice’ rule.
The EAT noted that if such evidence could be excluded, the result would be that an employer in dispute with a black employee could say during discussions aimed at settlement in a meeting expressed to be without prejudice ‘we do not want you here because you are black’ and then argue that the comment should be excluded at any subsequent race discrimination hearing. While such an obviously discriminatory remark would clearly fall within the unambiguous impropriety exception, the EAT rejected the notion of a sliding scale of such remarks where different levels of impropriety would be attached for fact-sensitive allegations of discrimination.
Where does this leave the employer with the poorly performing sales manager referred to at the beginning of this article? An open conversation with a ‘resign or be dismissed’ ultimatum would allow the employee to claim constructive dismissal.
If there is no dispute between the parties (because the poor performance issues have not been put to, and not accepted by, the employee) then there can be no ‘without prejudice’ discussion. Even if the employer has started the poor performance procedure and so could argue that there was a dispute between the parties and the discussion was therefore properly ‘without prejudice’, if the employer makes any discriminatory comment during such a discussion, the employee will be able to rely on that in any subsequent claim of discrimination.
The safest way of proceeding in all cases must be to complete the poor performance or disciplinary procedure and only then embark on any ‘without prejudice’ discussion. At the very least, the open procedures must be followed concurrently with any ‘without prejudice’ discussions. Unfortunately, this means that employers will have to put more time and effort into following their procedures through to their conclusion and will have to forego what may in the past have proved to be the quick fix of a ‘without prejudice’ discussion at the outset.
Ann Bevitt is partner and employment lawyer at Morrison & Foerster, London
- Make sure that there is an existing dispute between you and the employee before starting any ‘without prejudice’ discussions: this will usually mean following, or at least starting, your normal procedures before embarking on any such discussions.
- Obtain the employee’s consent to any ‘without prejudice’ discussions. Ideally, the consent should be either in writing or witnessed by someone other than the person who is going to conduct the meeting.
- Keep the open procedures going and completely separate from any without prejudice discussions.
- Ensure that no discriminatory remarks or comments are made during either open or ‘without prejudice’ discussions. Where the dispute between you and the employee relates to allegations of discrimination, do not make any concessions or admissions of discrimination in any ‘without prejudice’ discussions.