Here we list a selection of key cases on settlement and compromise agreements, providing a summary of the decision and implications for employers.

[2017] UKEAT/0090/17/DA
Issue: Limitations of protected conversations

An IT consultancy had concerns over an employee’s performance. He was a technical ‘architect’ who had been employed by them for over 2.5 years. After a brief meeting raising the concerns he was sent two letters, one inviting him to a disciplinary hearing and the second letter headed “without prejudice and subject to contract”. In this letter he was offered a settlement agreement plus three months' notice. The offer expired if it was not accepted before the disciplinary hearing.

The settlement agreement was not signed but Mr Basra said he accepted the offer ‘subject to contract and without prejudice’ and instructed solicitors who informed the employer that he was signed off with stress and would not attend the disciplinary hearing. The employer then wrote to confirm that his employment had been terminated by mutual agreement.

Mr Basra claimed this letter in fact dismissed him and sought to claim unfair dismissal. The employers said there had already been a mutual termination based on their earlier offer and his acceptance.

The key issue was that if the date of termination and the reason for the termination are both in dispute, were the settlement conversations fully protected or could the tribunal be informed about the nature of the discussions.


The EAT decided that where the exact date and nature of the termination are disputed, the full protection from protected conversations will not apply.

Implications for employers

The law enables employers to open discussions with employees about possible termination of their employment without being worried about those discussions being revealed later on. In most cases protected conversations remain private and cannot be considered by an employment tribunal if a later claim arises. For without prejudice discussions there needs to be a prior dispute before protection arises. There is no similar requirement under the protected conversation process for a prior dispute to exist before the conversations can commence. However in certain circumstances, this exclusion may be limited:

  • Normally employers and employees should not even make reference to the fact that protected discussions have taken place.

  • The protection provided by protected conversations only extends to unfair dismissal claims anyway.

  • The protection of protected conversations is a legal requirement   and cannot be waived even by the consent of the parties. 

However where the nature of the dismissal and effective date of termination are both in question the normal protections may not apply. Employers should remember that if there is any doubt as to the nature of a dismissal, they should not rely on the fact that the discussions can be kept fully secret.

Issue: ‘Without prejudice’

A secretary at a firm of surveyors had been employed for six years. She had worked on a part-time basis, but towards the end of her employment the firm said that part-time working was no longer an option. Discussions about a settlement agreement followed, with letters being marked ‘without prejudice’ referring to the pre-termination discussions that had taken place. Provided that a genuine attempt is being made to settle a dispute, details of such negotiations are normally inadmissible in courts and tribunals.

The secretary then raised a grievance alleging an underlying strategy to bully her out of her job to avoid a financial settlement. In the grievance she referred to the contents of the ‘without prejudice’ letters alleging that the correspondence contained more evidence of threatening and bullying behaviour.

When she resigned and claimed constructive unfair dismissal and sex discrimination were those documents and the fact that discussions had taken place admissible in evidence? The employer argued that they could not be relied upon as they were ‘without prejudice’.


The Employment Appeal Tribunal (EAT) considered the law which prevents protected conversations from being referred to in employment tribunal proceedings for unfair dismissal. The EAT held that the rules do not just prevent the parties from revealing the content of protected conversations, but also prevents disclosure of the fact that the discussions have taken place at all.

Internal communications even referring to settlement discussions will generally be inadmissible in any claim of unfair dismissal.

Interestingly unlike the normal ‘without prejudice’ rules the EAT also held that the protection always applies and cannot be waived, even with the agreement of the parties.

The discussions could not therefore be disclosed. However, disclosure can take place if there had been undue influence, harassment, bullying or intimidation. The Acas Code of Practice on settlement agreements gives examples of such improper behaviour and the case was remitted back to the tribunal to determine if the employer’s conduct was improper and if the discussions were admissible for that reason.

Implications for employers

During pre-termination negotiations both the statutory concept of 'protected conversations' and the old 'without prejudice' rules allow employers and employees to have confidential discussions about ending the employment relationship.

There has been some uncertainty as to the extent and the scope of pre-termination negotiations and this is the first case decision to provide guidance.

While employers have been used to negotiating under the 'without prejudice' rule for some time there are fundamental differences between the way that the legislation about protected conversations and the without 'prejudice' regime work in practice.

Two key differences are that:

  • The rules on protected conversations only apply to cases of unfair dismissal (including constructive unfair dismissal, but with the exception of automatically unfair dismissal, claims).

  • As the protection only applies to proceedings relating to unfair dismissal, where there is an additional claim (for example, for sex discrimination) the employment tribunal would allow the evidence for the additional claim, but not for the unfair dismissal claim.

Anything said or written during the pre-termination negotiations can generally not be used against the parties in subsequent tribunal proceedings. The long-established rules relating to 'without prejudice' communications mean that the parties can waive the protection that would otherwise apply to their discussions if they reveal the contents in non-protected open correspondence. However with protected conversations the parties cannot even mention the existence of pre-termination negotiations in any later litigation.

Unlike the rules relating to 'without prejudice' communications, the parties cannot waive the privilege that applies to protected conversations, even by agreement. The employer or employee should object to any attempts by the other party to refer to protected conversations or 'without prejudice' correspondence.

Pre-termination discussions are not straightforward and the rules must be followed in order to benefit from protected conversation protection. The statutory protection will not apply where there is improper behaviour and employers should conduct negotiations carefully as their comments could ultimately be seen by an employment tribunal. The Acas Code of Practice on settlement agreements should be followed.

Issue: Unfair dismissal – 'without prejudice'

An employee was being dismissed for misconduct and entered into negotiations towards a settlement agreement using correspondence marked ‘without prejudice’. In the negotiations the employee also asked for the dismissal to be categorised as a redundancy, which it was not. The negotiations failed and he was dismissed. The employee claimed he was a whistleblower and alleged he was therefore automatically unfairly dismissed for making a protected disclosure.

As part of its defence the employer wanted to reveal the negotiations to the employment tribunal to disprove the whistleblowing allegations and argued that the ‘without prejudice’ correspondence was not really in accordance with the ‘without prejudice’ rule and should be admissible before the tribunal.

The employer tried to say that just because there were negotiations about a settlement agreement did not mean they were in a legal dispute at the time. 


The Employment Appeal Tribunal (EAT) ruled that there clearly was a legal dispute in existence at the time of the negotiations. Therefore the ‘without prejudice’ rule did apply to the correspondence and it was therefore all inadmissible at the tribunal hearing. The EAT provided some helpful reminders about the ‘without prejudice’ rule.

Implications for employers

  • ‘Without prejudice’ communication can be used to settle claims thereby avoiding litigation.

  • Settlement negotiations which arise where an actual legal dispute already exists (or is imminent) are confidential and cannot be revealed to the court or tribunal unless the parties agree.

  • The ‘without prejudice’ rule arises from case law and enables the parties to be able to negotiate without fear that the communications can later be used by either party as an admission of liability.

  • The use of the words ‘without prejudice’ does not automatically make the communication private. For correspondence between parties to be protected it must be made in a genuine attempt to settle a dispute between the parties.

  • To determine whether there is an actual or potential dispute, a tribunal will consider the context of any correspondence marked ‘without prejudice’, and not simply focus on the labels on the correspondence itself.

  • A party making a ‘without prejudice’ offer reserves the right to assert its original explanation about the dispute if the offer is rejected and litigation proceeds.

  • In this case the discussion about the alternative reasons for the dismissal helped show that there was a present dispute, or the potential for a future dispute, which meant that the ‘without prejudice’ rule applied.

  • The fact that a settlement agreement is being negotiated does not automatically mean that there is an actual or potential dispute between the parties, but that will very often be the case.

  • The facts giving rise to this case were before ‘protected conversations’ were introduced in July 2013 which enable employers to have discussions with employees about ending the employment relationship.

  • However ‘protected conversations’ only apply to potential ordinary unfair dismissal cases. Normal rules about ‘without prejudice’ conversations are the only source of protection for employers in potential discrimination claims and automatically unfair dismissals.

  • Employers should only be assured of protection by the ‘without prejudice’ rule where there is an actual or potential dispute. A complete surprise approach to an employee with a settlement offer will not attract ‘without prejudice’ protection.

[2007] EWCA Civ 502
Issue: 'Without prejudice' protection for documents created before litigation

The CEO of a company alleged his employer had breached his employment contract. Over a five-month period, discussions took place between the parties about his potential departure which led to a draft settlement agreement marked 'without prejudice'. The negotiations broke down and Barnetson was subsequently dismissed and began a claim for wrongful dismissal. His witness statement referred to the 'without prejudice' negotiations and draft compromise agreement.

The employer tried to strike out passages from the witness statement on the grounds these should remain private under 'without prejudice' privilege. A key issue was whether the comments made before the litigation were privileged, as at that time the actual 'dispute' had not started.


The Court of Appeal held that the discussions between the CEO and the employer were protected by the 'without prejudice' principles and were inadmissible in court. The witness statements referred to events and comments which had taken place before any threat of litigation. The crucial issue was whether the parties might be considering litigation if the negotiations did not lead to a compromise. The court found that during their negotiations both parties were clearly aware of the possibility of litigation and the discussions were, therefore, without prejudice.

Implications for employers

In settlement negotiations with a departing employee, employers may have either 'protected conversations' or 'without prejudice' discussions, or a mixture of both. This is to encourage employer and employees to feel free to settle their differences without litigation. These negotiations, commonly called 'off-the record' conversations, and are used to agree the terms of an employee's departure.

'Protected conversations' apply to conversations held when there is no existing dispute. If there is an existing dispute, then employers can legitimately hold 'without prejudice' discussions. Parts of witness statements can be struck out if they incorrectly refer to without prejudice matters written or spoken in the course of negotiations.

Points to remember:

  • It is not always clear which documents created before the threat of litigation may be classified as without prejudice.

  • Employers should expressly say that settlement discussions are 'without prejudice' but this label does not by itself protect documents from being referred to later. There must be a genuine attempt to achieve a settlement.

  • Employers should take particular care to ensure that without-prejudice privilege does apply to protect discussions that are genuinely aimed at avoiding litigation.

  • The courts will look at the substance of any documents or discussions. For example, an initial informal chat with an underperforming employee would not be covered by without prejudice privilege.

  • An existing 'dispute' doesn't require a formal claim to have been instigated, but the parties do need to be considering litigation if they cannot reach agreement.

A 'protected conversation' allows employers and employees to discuss exit packages, provided the employee agrees to such a conversation. However, these dialogues have a narrow definition and mainly apply to potential unfair dismissal claims. As they don't cover other matters, such as discrimination, automatically unfair dismissal, breach of contract or health and safety, this means a conversation involving, for example, ill health may not be protected.

The safest course of action is probably for employers to avoid saying anything incriminating in the course of either a without prejudice or a protected conversation.

[2007] EWCA Civ 482
Issue: Waiver of 'without prejudice' protection

Two employees brought discrimination claims against their employer, Brunel University. The Vice Chancellor published articles mentioning how employees at the university demanded unreasonable amounts of compensation in discrimination claims. The employees then brought additional claims for victimisation, arguing that they had been laid open to ridicule and subjected to a detriment as a result of the original discrimination actions.

Without prejudice discussions had taken place about the discrimination disputes, and the university argued that the employees could not refer to these in their victimisation claims. When first advised of the potential victimisation claim, the University held grievance meetings and hearings which had examined the settlement discussions to determine exactly what had happened. The employer argued that these hearings still contained privileged discussions.


Court of Appeal held that the privilege had been let go or 'waived' in the grievance meetings which were really quite different from usual grievance meetings. The panel members were selected because they knew nothing about the dispute and their function was not to try to resolve the grievance but to act as independent adjudicators.

The Court of Appeal said that many internal grievance hearings may refer to matters covered by 'without prejudice' privilege which cannot be referred to in a later hearing. Here the employer and employee had referred to the 'without prejudice' discussions in both the ET1 (claim form) and ET3 (response form) and so had all effectively waived their right to claim that the discussions were privileged.

Implications for employers

The 'without prejudice' rule prevents employers' or employees' oral or written statements made in a genuine attempt to settle an existing dispute from being revealed to a court or tribunal later on. Employers may say that a meeting, conversation or communication is 'without prejudice' but that label does not mean that it is. There must be an actual dispute.

The without prejudice rule is there to ensure that parties are encouraged to settle disputes. Some communications which initially appear to be protected under 'without prejudice' privilege can subsequently be referred to in legal proceedings. This can occur when:

  • there is not yet a dispute between the employer and employee
  • all parties agree to waive privilege
  • there is something improper that one of the parties has done
  • the privilege has been waived by the parties referring to without prejudice discussions which have previously taken place.

[2004] IRLR 509, EAT
Issue: 'Without prejudice' rule not applicable to grievance discussions

A senior bank executive raised a grievance about treatment related to her maternity leave and was told to stay at home while her grievance was processed. On being asked to return to work, there was a meeting to discuss her position and the employer said it wanted the discussions to be without prejudice.

The employer said it was not viable for the executive to return to her old job and suggested that it would be best for everyone if she ended her employment. The employer offered a standard redundancy package of almost £100,000 which did not lead to settlement.

In later proceedings, the employers argued that no reference could be made to anything said at the meeting since it was all subject to 'without prejudice' privilege.


The EAT held the 'without prejudice' rule did not apply and the discussions were not covered by legal privilege. For the rule to apply, there must be a dispute between the parties and the written or oral communications must be in a genuine attempt to compromise. The act of raising a grievance does not by itself mean that the parties to an employment relationship are necessarily in dispute.

It would be an abuse of the without prejudice rule to allow the organisation to prevent any reference to the fact that it had sought to terminate the employee's employment.

Implications for employers

Negotiations over a settlement agreement will often fall under the without prejudice rule which makes any evidence of communications made in proper settlement negotiations inadmissible. The policy behind the rule is that the parties should not fear that anything they say in the negotiations would be used against them if the discussions fail to resolve the dispute.

There are numerous important requirements for the rule to apply. There has to be an existing dispute and the rule does not let people cover up blackmail or other serious impropriety. It will not work if employers try to initiate settlement discussions, intending them to be without prejudice, before a dispute has arisen.

Employers can also use 'protected conversations' with a view to negotiating an agreed termination with an employee. However, due to various limitations associated with protected conversations, relying on them completely is risky.

​Please note: While every care has been taken in compiling these notes, CIPD cannot be held responsible for any errors or omissions. These notes are not intended to be a substitute for specific legal advice.

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