Can a without prejudice offer letter terminate a contract of employment by mistake?

The simple answer is yes, as in the noteworthy case of Meaker v Cyxtera Technology.

Both an employee’s case circumstances and any corresponding language used by an employer to deal with it can be protected by the without prejudice veil but, if you get the process and language wrong, you can easily create an expensive and embarrassing unfair dismissal case.  

What happened in this case?

Mr Meaker suffered back injuries on 2nd November 2018, after which he had extended time off work.

It became clear his physical limitations (which meant he could not do his heavy manual role) were likely to be permanent.

A conversation took place with HR, during which it was indicated that termination was likely and a Settlement Agreement was proposed.

Mr Meaker believed there would be further efforts made to look at alternative employment, but on 5^th February 2020 (received 7^th February 2020) a “without prejudice” letter was sent out by his employer.

The without prejudice letter referred to:

• an agreement to mutually terminate employment;
• with the last day of work being 7^th February 2020;
• that he would be paid to that date and in lieu of his notice period; and
• an offer of a further ex gratia sum on signing a Settlement Agreement.

The wording used was:

“We have agreed that your employment with the Company will terminate by mutual agreement by reason of capability”.

It was found by the Employment Tribunal that:

• the letter was disclosable as evidence despite being marked as “without prejudice”;
• the letter did indeed terminate the contract by summary dismissal, even though it sought mutual agreement and was without prejudice;
• Mr Meaker, the Claimant, had not understood that a decision had been made to terminate; and
• the language in the letter was found to be unequivocal and not couched in terms which might indicate that this was a possibility open to Mr Meaker to accept or not. Therefore, having not accepted the offer, he was summarily dismissed by the letter and those parts of it were referred to by the Employment Tribunal.
  
  

What does this mean for employers?

Employers often decide to end an employment relationship by way of a Settlement Agreement for many reasons.

That can often be safely done by way of a “protected conversation” - a statutory mechanism allowing the employer to discuss termination and an exit payment without in fact terminating the employment in situations where they may be liable for a claim.

Such conversations and the documents surrounding them must be very carefully drafted to avoid a situation where the employer in fact dismisses – as above – without a fair process and creates a claim.

Tips on managing this process:

• Always get advice if you embark upon such a process, especially if you are doing so mid-way through potential disciplinary/grievance or other internal processes.
• You risk handing an unfair dismissal claim to an employee “on a plate” if the wording and process are not carefully legally constructed to be, among other things, at least clear that the termination is only offered:
• as part of a contractual settlement offer and process; and
• that the employee is not obliged to accept it, but can choose to go through the internal process instead if they wish.
• It is also vital not to say anything which indicates that the process itself has been pre-judged in any way.