What constitutes unambiguous impropriety in without prejudice communications?

Where employers attempt to engage in genuine discussions with the intention of settling an existing dispute with an employee, the without prejudice rule generally prevents verbal or written statements from being used during future tribunal or court litigation as evidence of admission of wrongdoing by the party offering settlement.

However, where a party engages in improper behaviour such as perjury, blackmail or other unambiguous impropriety, the without prejudice rule will not apply and the other party may be able to rely on the statements made during any future litigation. Case law has established that this ‘unambiguous impropriety’ exception to the without prejudice rule, should only apply in the “clearest cases of abuse of privileged occasions” (Unilever plc -v- Procter & Gamble Co).

Case study: Swiss Re Corporate Solutions Ltd -v- Sommer

In the recent case of Swiss Re Corporate Solutions Ltd -v- Sommer, the Employment Appeal Tribunal (EAT) has provided a useful insight for employers into where supposed without prejudice communications might overstep the mark into being unambiguously improper, enabling the employee to later rely on the statements made in future litigation.

In the Swiss case, Mrs Sommer was employed by Swiss as a political risk underwriter. Following a period of maternity leave in 2020, Mrs Sommer was informed that her role was at risk of redundancy, unlike others within her team.

Mrs Sommer raised a number of grievances with Swiss, none of which were upheld.

However, when submitting her grievances, Mrs Sommer had sent emails containing confidential information regarding both her colleagues and Swiss’ clients from both her personal and her husband’s personal email addresses.

This resulted in a HR partner from Swiss writing to Mrs Sommer informing her of a “low level data breach”. She was asked to explain why it had occurred and told to delete the information from her personal email address. A disciplinary process was subsequently started on 20 January 2021, and on 22 January 2021, Mrs Sommer issued proceedings in the employment tribunal (ET) against Swiss.

On the same date, Swiss’ solicitors sent a letter labelled as ‘Without Prejudice’ to Mrs Sommer, which alleged that she had breached confidentiality obligations contained in her contract of employment, and in doing so had committed a criminal offence under the Data Protection Act.

The letter also alleged that Mrs Sommer had lied to her employer and that she might have acted without integrity, placing her in breach of Financial Conduct Authority (FCA) rules. The letter concluded that Mrs Sommer’s conduct could result in her dismissal without notice, a criminal conviction, fines and FCA findings that would make it hard for her to find work in the regulated sector in the future. A settlement offer was made.

Shortly after this, Swiss’ disciplinary investigation concluded. Mrs Sommer was found to have breached her employment contract but, in light of strong mitigating factors, only informal action was recommended.

At a preliminary hearing before the ET, Mrs Sommer argued that Swiss’ without prejudice letter should be admitted into evidence because it constituted unambiguous impropriety, to which the ET agreed.

The judge particularly noted the “striking disparity” between what was known at the time about the alleged misconduct and what was said about it in the letter. The judge considered the fact that the alleged breach was not raised as an issue at the time it occurred (it was not until some months later and after the grievance process had concluded that the breach was raised as an issue), that it had been described as a low level breach and that the letter had been sent before any facts had been established following a reasonable investigation.

As a result, the judge concluded that there was no basis at all for the letter to assert that Mrs Sommer was guilty of serious misconduct meriting summary dismissal or, in fact, that she had committed a criminal offence.

Key takeaways for employers

The ET held that the severity of what Mrs Sommer had done had been grossly exaggerated in a way that was designed to put pressure on her to accept immediate termination of her employment. The making of those threats in those particular circumstances was an abuse of without prejudice privilege and unambiguously exceeded what was permissible in attempts to settle litigation.

Swiss appealed the decision, and in doing so, the EAT gave some helpful guidance for employers wishing to engage in without prejudice correspondence.

• Firstly, there is nothing inherently wrong with referring to a potential disciplinary process in without prejudice communications. However, employers should be mindful not to raise such matters in a dishonest manner or in an attempt to blackmail employees.
• It is completely standard for parties attempting to negotiate settlement to threaten to bring or continue legal proceedings. Unambiguous impropriety arises in cases where a party threatens criminal proceedings as a lever for settling civil disputes.
• The exaggeration of allegations is unlikely to be unambiguously improper. Baseless allegations, however, may well be evidence of dishonesty which might lift without prejudice privilege.
• A finding of unambiguous impropriety depends on a rigorous assessment of what is actually said and can only be made in a very clear case, which is likely to require verbal evidence on the state of mind of the person alleged to have acted improperly.

In setting out the above guidance, the EAT has provided employers with a reminder to think carefully about how they present without prejudice communications. There are times where it might seem easier to grossly overstate allegations and threaten certain types of action with a view to achieving an easier settlement, but this will often bring employers close to the line of improper behaviour.