Settlement agreements are commonly used as a means of resolving disputes between an employer and employee. In many circumstances, settlement agreements arise as a result of disputes during redundancy, capability or disciplinary process. Whilst they can be made at any stage of the employment relationship, and do not always result in a termination of it, settlement agreements are often proposed as a way of ending the relationship by mutual agreement.
Both the employer and employee will have demands they wish to be met in the agreement, looking for the “best deal” they can achieve, so there can be considerable negotiation place before the final terms are agreed. These negotiations typically take place on a ‘without prejudice’ basis. In a nutshell, this means that if negotiations break down, discussions around the settlement agreement (and indeed often the fact it was proposed) cannot be referred to in in litigation before an Employment Tribunal. However, there is a significant caveat to this rule: the ‘without prejudice’ doctrine only applies if there is an existing dispute between the employer and employee and the discussions are a genuine attempt to resolve that existing dispute. No dispute = no such protection.
Whether the circumstances amount to a “dispute” depend on the individual circumstances. For example, if there is no existing dispute, the fact that an employer states that a conversation, for example about poor performance and potential exit, is “without prejudice” does not make it so. However, if there is a genuine dispute, such as a breakdown in the relationship arising from discussions concerning poor performance, the conversation may well be protected. It can be a very fine line. Even, the fact an employee has raised a grievance may not always amount to a dispute of itself. It will depend on a number of factors including the contents of the grievance and whether the grievance would be upheld by the employer. The mere labelling of a conversation or document as “without prejudice” will certainly not make it so alone (although without prejudice documents should always be marked as such!)