Privilege waiver

Negotiations about compromise agreements (which allow employees to sign away their statutory rights in return for a severance payment) are “privileged”, meaning they cannot be disclosed unless both parties agree. In Gallop v Newport City Council, the Employment Appeal Tribunal (EAT) held that tribunals must not ask questions about compromise negotiations unless both parties have waived their privilege.

Basic facts

Mr Gallop worked for the Council in various capacities from April 1997. A few months after being promoted in February 2004, he started complaining of stress and told his employer he thought there was a problem with his job description.

After seeing the Council’s occupational health (OH) doctor, he was signed off sick in August 2005. In September OH advised the Council he was suffering from a “stress-related illness” related to his work. He was signed off sick again a year later by his GP, this time with depression.

Although attempts were made to reach a compromise agreement involving the termination of his employment, no agreement was reached. Instead, the Council took disciplinary proceedings which resulted in Mr Gallop’s dismissal for misconduct in May 2008.

Tribunal decision

The tribunal held that the dismissal was unfair. In assessing his compensation it held there was a 50 per cent chance that, had he not been unfairly dismissed, he would have left his job under the terms of the compromise agreement.

It came to this conclusion having taken into account evidence from one of the council’s witnesses in response to a question by a member of the tribunal panel about a document that referred to a mutual termination and Mr Gallop’s evidence that he was unaware of this until a draft compromise agreement was prepared.

The tribunal therefore reduced the notional compromise agreement payment of £11,850 (the sum offered by the Council during the discussions) by 50 per cent as well as the awards for loss of earnings, pension loss and notice pay.

Mr Gallop appealed against that finding as well as the reduction in his award, arguing that it was “manifestly unjust” to use the fact that he didn’t enter into a compromise agreement against him when assessing remedy.

EAT decision

The EAT held that it was “plainly wrong” that evidence about the compromise agreement was considered without the agreement of the two parties.

Tribunals, it said, “must not enquire into negotiations between the parties before them where no agreement is reached and where there has been no clear and unequivocal waiver of privilege by the parties. ... It is pellucidly clear to us that privilege was not waived in this case, and no advice was given to the Claimant in person as to the principles of privilege”.

The EAT therefore allowed Mr Gallop’s appeal against the 50 per cent reduction and increased the tribunal’s total award from £33,045.40 to £60,060.82.