New Zealand: No such thing as 'off the record' in employment discussions

Employers who try to sort out staff performance issues 'off the record' leave themselves vulnerable.

The sentiment is all very admirable, and may be designed to give employees the opportunity to exit a business gracefully, rather than face the spectre of internal disciplinary action. But in reality, these 'off the record' conversations can expose employers to a high risk of liability.

A recent Employment Relations Authority decision, Blakeley v ACM New Zealand Ltd, highlights the problem. In this case, comments made during a discussion which was intended to be (and indeed agreed as being) 'off the record' gave rise to a cast iron constructive dismissal claim. So, having gone from a position where an ordinary disciplinary process might have led to a justifiable dismissal, the employer's actions gave the employee, not just a shield, but a sword.

The "without prejudice" rule

The without prejudice rule is designed to encourage people to settle disputes without resorting to litigation. It basically enables frank conversations, without fear of remarks made being referred to in current, or subsequent proceedings. But the protection provided by the rule, as can be seen in the Blakeley case, is limited. Extreme caution should be taken when instigating any form of 'off the record' chat.

In Blakeley, ACM Ltd (the employer) called Ms Blakeley to a meeting to discuss her apparent disinterest in her job and her inadequate performance. At the start of the meeting, and before any mention of the discussion being 'without prejudice,' ACM indicated that it believed Ms Blakeley's role within the business was 'untenable.' ACM went on to make an offer of settlement, in return for Ms Blakeley agreeing to leave the business. It was made clear that if the offer was not accepted, Ms Blakeley would be put through a formal disciplinary process, which would be likely to result in her dismissal.

No settlement was agreed and Ms Blakeley resigned in response to the comments made during the meeting. She brought a claim for unjustified constructive dismissal, which was coined by the ERA as being a "textbook illustration" of such a case. Ms Blakeley's (constructive) dismissal was also held to be unjustified, owing to the absence of any form of procedure. The ERA clearly took a dim view of the attempted use of the discussion to avoid the requirement to follow due process.

Notably, the ERA held that the initial comments regarding the relationship being 'untenable', which were made before any mention of discussions being on a 'without prejudice' basis, were enough to undermine the without prejudice rule anyway.

Particularly alarming for employers is how readily the ERA was prepared to find that the without prejudice rule did not apply to the discussion, which was understood by both parties to have taken place 'off the record.'

Adding insult to the employer's injury, the ERA also pointed out that the lack of any investigation into Ms Blakeley's performance issues, meant that there was no evidence that she had contributed to her dismissal (i.e. by being a poor performer) so there were no grounds to argue that compensation should be reduced.

Practical tips:

  1. Have a 'Plan A' and start that process before any 'without prejudice' discussion takes place.

Without prejudice conversations should not take place until there is evidence of a 'a significant difference of opinion between employer and employee' about a matter affecting them both.

Employers should get the relevant process (e.g. performance management/disciplinary action etc) under way before attempting any 'off the record' discussions. This should mean that the employer is able to point to a 'dispute' when initiating such discussions.

This has the added benefit of documenting the concerns or issue, which, in the worst case scenario of the discussions being used against the employer to bring a successful claim, will hopefully help to reduce any compensation payable based on 'contribution.'

  1. Obtain agreement that the conversation is 'off the record' before any comments are made.

Take care not to make damaging remarks before agreeing to proceed on a without prejudice basis. For example, in the Blakeley case, the employer said"we consider the continuation of the employment relationship to be untenable" and went on to say that was why they wanted to have a without prejudice chat.

  1. Take care not to say anything which could give rise to a claim in its own right.

The ERA and Courts have the ability to ignore the without prejudice rule, in some circumstances. This includes when a comment gives rise to the basis for a claim in its own right, for instance discriminatory remarks about the employee's sex, race, age, etc. made during a without prejudice discussion.

  1. If in doubt – go to mediation

If there never seems to be the right time to initiate a without prejudice conversation, or you are unsure whether the 'dispute' exists sufficiently, mediation of an employment relationship problem through Mediation Services (part of the Department of Business, Innovation and Employment) is a simple and effective way of instigating a without prejudice dialogue. This is because everything said at mediation is without prejudice and cannot be referred to during any subsequent proceedings.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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