BEWARE THAT TRICKY END OF EMPLOYMENT CONVERSATION

Advocate John T Aycock reviews how ‘off the record’ chats with employees to discuss an exit package might backfire and identifies an Isle of Man distinction to the law in this field.

There is an emoji, I am reliably informed, with the hand on the forehead expressing the sentiment “oh no”; this facepalming symbolises exasperation, embarrassment or frustration.

Those emotions might run through the mind of a manager who has just had an inappropriate conversation with an employee about a possible compensation package to leave. In a difficult situation, employers might want to have an off the record conversation to initiate discussions on a possible exit package. With the best of intentions, the employer might think that it could suit both parties and might cut through a drawn out process.

Unfortunately for them, though, labelling such a conversation off the record makes no difference to the legal position on whether that conversation becomes admissible evidence in a possible claim. And worse still for the employer, sentiments expressed during the chat might encourage the employee to make a claim because, if the dialogue becomes admissible, it can be powerful evidence that the business has decided the employee’s face no longer fits. Such evidence adds considerable weight to a constructive dismissal claim with the employee relying on, for instance, a breach of the mutual trust and confidence that should permeate the employment relationship.

This is where the “without prejudice” rule might come to the rescue of an errant employer. If the settlement discussion is made against the backdrop of a sufficient dispute then the mention of an exit package might be deemed a genuine attempt to settle that dispute and therefore be protected from admissibility in evidence by it being deemed without prejudice. Of course the better way to proceed would be for any such discussions (orally or in writing) to be specifically labelled without prejudice. Provided there is an existing dispute (involving employment rights) a discussion aimed at resolving should be inadmissible in subsequent proceedings. This supports the public policy of encouraging resolution of disputes. If not specifically labelled without prejudice it can still be impliedly without prejudice and thus inadmissible. Beware though that the without prejudice privilege is not absolute - it cannot cloak improper behaviour such as blackmail threats.

A recent employment appeal tribunal case from England has reviewed this situation. Previously there was case law supporting the position that an employee raising a grievance did not of itself mean there was an existing dispute capable of facilitating a genuine without prejudice dialogue. The more recent case has softened that approach. It said that a grievance can be enough to create a dispute, so allowing the without prejudice rule to be deployed. In that case a company secretary returning from maternity leave submitted a grievance against managers for mistreatment, discrimination and harassment. A without prejudice discussion took place and an offer to settle based on an exit was made. The offer was not accepted and the employee unsuccessfully pursued her grievance then made tribunal claims for discrimination and constructive dismissal while referencing the employer’s offer to terminate her employment. The company objected to this evidence being admissible.

In the appeal dealing with this point it was decided there was a sufficient dispute by the time of the without prejudice meeting and the employee’s grievance was closely linked to the subsequent tribunal claim. The Employment Appeal Tribunal made it clear that the without prejudice rule is to encourage settlement and therefore such discussions should only be admissible in evidence in very clear cases.

The complicating factor in the Isle of Man is this. In England there is statutory provision for a pre-termination discussion whereby those discussions are protected from admissibility in subsequent proceedings, namely section 111A of the Employment Rights Act 1996 of Parliament. It was introduced by amendment in England in 2013. It applies only to ordinary unfair dismissal claims not other claims such as discrimination. In the Isle of Man that provision is not applicable and is not included in our Employment Act 2006 of Tynwald. We have the without prejudice rule to protect such conversations plus statutory confirmation that conciliation through the Manx Industrial Relations Officer is not admissible in Tribunal evidence.

Manx employers should therefore continue to be cautious about initiating discussions about an exit package when there is no existing dispute. If they do so, they may well be exacerbating the situation by presenting the employee with a much clearer right of action to found an Employment & Equality Tribunal claim. On the other hand, if there is a relevant dispute in place then without prejudice negotiations to discuss early settlement (perhaps through the helpful auspices of Manx Industrial Relations Service) are a cost saving and often mutually beneficial way to proceed. Smiles all round might then replace exasperation.

Advocate John T Aycock is head of the employment team at M&P Legal and has over thirty years’ experience of employment law cases in three different jurisdictions.

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