Letter headed “without prejudice” and offering settlement agreement was a dismissal letter

EAT: claimant was dismissed by means of letter which wrongly referred to termination by mutual agreement.

Conducting “without prejudice” negotiations can be tricky for employers. It can be difficult to appreciate the distinction between those discussions and documents which are part of on the record HR processes, and those which are off the record and seeking to resolve a dispute between employer and employee.

A recent EAT case provides a useful reminder that documents headed “without prejudice” might nevertheless be wholly or partly on the record or “open” documents, and highlights the need for clarity about the status of such documents, particularly where they include arrangements for termination and a dismissal date.

The without prejudice rule

The without prejudice rule will apply to make communications inadmissible as evidence in a court or tribunal if there is an existing dispute between the parties at the time of the communication and the communication is a genuine attempt to settle the dispute in question.

For more detail on what is meant by “without prejudice”, please see our recent article which remains available on the Wrigleys website: Will the without prejudice rule apply to make settlement negotiations inadmissible as evidence?

When does dismissal take effect?

Proposed settlement terms will usually include a proposal for employment to terminate by mutual agreement on a specified date. If such terms are agreed, employment will terminate without a dismissal or resignation. If the settlement terms are not ultimately agreed, employment will continue under the terms of the employment contract until one party terminates the contract or the contract expires.

There are a number of reasons why having clarity on the date of termination of employment is important. Not least, determining the date when dismissal took effect is crucial when working out whether an unfair dismissal claim has been brought within the three-month time limit (subject to the time for Acas Early Conciliation being added).

Interestingly, case law indicates that termination of an employment contract for contract law purposes can take place on a different date to the statutory “effective date of termination” (EDT) under the Employment Rights Act 1996. It is the EDT which is the key date when working out how long a claimant has to bring an unfair dismissal claim.

The EDT takes place:

• If notice has been given by employer or employee, on the date when notice expires;
• If termination is without notice, on the date termination takes effect;
• If a fixed term contract expires without being renewed, the date on which the term expires; and
• If a limited-term contract terminates by virtue of the limiting event occurring without being renewed, the date on which the termination takes effect.

Under contract law, in a case of repudiatory breach by the employer, the contract can continue beyond the EDT if the employee does not accept the breach and treat the contract as terminated. 

Case details:  Meaker v Cyxtera Technology

Mr Meaker was employed by Cyxtera Technology UK Ltd (Cyxtera). He was off sick for an extended period due to back injuries which meant his ability to carry out the heavy manual duties entailed in his role was permanently limited.

Cyxtera advised Mr Meaker that it was considering terminating his employment and raised the possibility of a settlement agreement. Cyxtera sent Mr Meaker a letter headed "without prejudice" on 5 February 2020. The letter stated that Mr Meaker’s employment would terminate “by mutual agreement” by reason of capability on 7 February 2020. It stated that he would receive payment in lieu of notice and accrued untaken holiday and that his P45 would be issued following his last salary payment.

The letter enclosed a settlement agreement with an offer of an ex-gratia payment. Mr Meaker rejected this offer. Cyxtera paid Mr Meaker his notice and holiday pay on 14 February 2020. A week later, it acknowledged Mr Meaker’s rejection of the settlement offer and explained why it could not allow him to return to work.

Mr Meaker brought a claim for unfair dismissal to an employment tribunal. At a preliminary hearing, his claim was dismissed on the basis that it was brought out of time and there was no reason to extend the time limit in this case. The tribunal took the time limit for the claim as running from the EDT of 7 February 2020. If the dismissal had taken place on 14 February, Mr Meaker’s claim would have been in time.

EAT decision

On appeal, the EAT upheld the decision of the employment tribunal.

The EAT made clear that the statutory concept of the EDT is not impacted by ordinary contractual principles. Where there has been a repudiatory breach of contract by the employer, the EDT is not dependent on the employee accepting that breach. In other words, there can be cases where the contract has terminated for the purposes of the EDT and an unfair dismissal claim, but carries on under contract law. In this case, the EDT was 7 February as set out in the letter.

Although the letter including the termination date was expressed to be “without prejudice”, the EAT held that it was open to the tribunal to find on the facts that the letter was a letter of dismissal. The EAT noted that:

• The letter was sent in a factual context where it was reasonable to conclude that the employer had decided to terminate Mr Meaker’s employment.
• Even though it may be safer and clearer to convey open and without prejudice communications in separate documents, it is possible for a single letter to contain some open content and some without prejudice content. This depends on the content of the letter rather than the label attached to it. The tribunal was entitled to find the letter fell into two distinct parts: a part that dealt with the termination and Mr Meaker’s legal entitlements on termination; and a part proposing further payments to which the claimant would only be entitled if he agreed to the settlement agreement.
• The letter stated that employment would terminate by “mutual agreement”. However the tribunal was entitled to find that other details given in the letter clearly communicated that dismissal for capability reasons would occur on the stated date and that this was not dependent on Mr Meaker’s agreement.

The EAT also agreed with the tribunal’s decision that the time limit should not be extended in this case. There was no suggestion that it was not reasonably practicable for him to bring the claim within the time limit and so the test for extending the time limit had not been met. Mr Meaker had trade union and legal advice and should in any event have known that his employer considered his end date to be 7 February, particularly when his final salary was paid up to that date.

Comment

It is not uncommon for there to be confusion about when an employment contract terminates for contractual and/or statutory purposes and this can lead to uncertainty and risk, for example in relation to salary payments, holiday accrual, notice payments and redundancy payments. As in this case, there can also be doubt as to the time limit for potential claims.

The employer was fortunate in this case that the tribunal interpreted the letter as being an effective letter of dismissal on the earlier date, and that the employee was therefore time-barred from bringing his claim. However, if the employer had not intended to dismiss and simply to propose terms for termination by mutual agreement, the letter could have unnecessarily increased the risk of an unfair dismissal claim.

It is advisable to seek specialist legal advice to ensure communications with employees about termination of employment are clear and do not create unnecessary risk. This is particularly the case where there are complex employment relations issues, and where there are parallel or overlapping on the record and off the record discussions and documents.

How Wrigleys can help The employment team at Wrigleys is expert in helping charities, third sector and education sector clients to create clear and compliant communications with employees at all stages of the employment relationship. We regularly assist our clients to navigate complex employee relations issues, including without prejudice proposals for terminating employment. Importantly, we work within the wider charities, social economy, and education teams at Wrigleys and so we have in-depth understanding of how our clients’ governance, regulatory and industrial relations obligations impact on their employment policies, processes and decisions.

 

If you would like to discuss any aspect of this article further, please contact Alacoque Marvin or any other member of the employment team on 0113 244 6100. You can also keep up to date by following Wrigleys employment team on Twitter The information in this article is necessarily of a general nature.  The law stated is correct at the date (stated above) this article was first posted to our website. Specific advice should be sought for specific situations. If you have any queries or need any legal advice please feel free to contact Wrigleys Solicitors.