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Employment Law Update – Keeping it off the Record

  • November 26, 2014

A recent Court of Appeal decision has clarified when discussions about resolving disputes will be regarded as ‘without prejudice’ so that they cannot later be used as evidence in court.

‘Without prejudice’ discussions can assist parties to resolve disputes without resorting to litigation. Parties can be frank, without fearing that those conversations will later be relied on in any subsequent proceedings, for example by claims that they have made admissions of liability. If a communication is truly ‘without prejudice’, it is privileged and no evidence about it can be used in the substantive claim. The recent case of Kenneth Lee Morgan v Whanganui College Board of Trustees considered such discussions and whether these could be used as evidence in the substantive case.

The law

The ‘without prejudice’ privilege can normally only be invoked when,

  • there is a dispute; and
  • the privileged communications are for the purpose of settlement of the dispute.

This protection has been extended in recent years to include negotiations where litigation is contemplated, or reasonably contemplated, at the time of communications.

The facts

Kenneth Lee Morgan was a senior teacher at Wanganui Collegiate School. Following an altercation between two male students, Mr Morgan intervened and placed one of the boys in a headlock to separate them. The school considered his conduct might be misconduct, and started an employment disciplinary process. The lawyer for Mr Morgan had several discussions with the lawyer for the school about how the matter could be resolved. The lawyers agreed that these would be without prejudice. At this stage, Mr Morgan had not raised or threatened a personal grievance. However, no agreement was reached. Mr Morgan was then dismissed on the basis of serious misconduct and he subsequently bought a personal grievance against the Trust Board.

The outcome

Mr Morgan claimed that damaging statements on behalf of the school, showing the dismissal was pre-determined, had been made in the ‘without prejudice’ discussions. He said they should be allowed as evidence as there was, at this stage, no dispute, or even something capable of being litigated. However, the Court of Appeal held that the application of without prejudice privilege extends to situations where there is a serious problem in the relationship and that problem arises out of the employment relationship. The Court commented that “the word dispute is not a term of art; its use was not meant to be exclusive and ‘negotiations’ or the broader term ‘difference’ will suffice”. The Court held that there was an employment relationship problem evident between the parties which required prompt resolution; the problem being whether Mr Morgan should be dismissed, or whether he should be subject to a lesser penalty such as a written warning.

Mr Morgan also argued that without prejudice privilege could not apply to communications unless the parties had gone through a formal hearing process. The Court disagreed and said that parties are encouraged to promptly solve problems between themselves. The Court added that it is in the best public interest to continue such practice, with the parties knowing that their discussions can’t be used as evidence against them in any subsequent litigation.

The Court concluded that the discussions between the lawyers were inadmissible. It stated that what was said during the discussions was on the mutual expectation of complete confidentiality and the parties concerned should be held to this agreement.

Take home points

  • Good faith is crucial – Remember to consider the correct processes before instigating any ‘without prejudice’ discussions. Whether this is in the form of initiating disciplinary processes or raising competency concerns in a formal way, this will at least allow the employer to point to a ‘serious problem in the relationship’.
  • Be cautious – Simply calling a discussion or communication ‘without prejudice’ is not enough. Discussions of this type should be approached with caution. A conversation or document does not automatically get ‘without prejudice’ status simply because it is labelled so. There must be a dispute or problem.
  • Seek legal assistance – There is no bright line defining what will and will not constitute a ‘dispute’ for the purposes of conferring ‘without prejudice’ privilege on a discussion. If you are in doubt, or believe that a ‘without prejudice’ discussion would benefit your situation, contact us and we will guide you through the process to ensure you are fully protected.

Other Employment Law Developments

Flexible working arrangements

The Employment Relations Amendment Bill (Bill) (introduced to Parliament on 26 April 2013) proposed a number of significant changes to New Zealand’s employment relations system. The Select Committee reported back in December 2013 with a number of recommendations and the Bill had its second reading in March 2014. However, following the resignation of John Banks in June the Government does not have the numbers needed to pass the Bill and as a result the Bill’s progress has come to a halt. We expect the Government will carry the bill over into the next Parliamentary term.

The Bill proposed a significant change to flexible working arrangements. Under the proposed change, all employees would have the right to request flexible working arrangements, not just those with caring responsibilities. The current six-month qualifying period would be removed so that all employees can request flexible working arrangements from the beginning of their employment. Currently, employees are restricted to one request in any 12-month period. The limit on the number of requests an employee may make for flexible working arrangements over a 12-month period would be removed. The time for an employer to consider a request would be reduced from three months to one. It must be emphasised that this is only a right to request flexible working arrangements. The grounds for refusing a request will remain unchanged.

It is of interest in New Zealand that similar changes have been implemented in the United Kingdom, with the recent enactment of The Flexible Working Regulations 2014 (Regulations). All employees who have been employed for 26 weeks will be able to request flexible working arrangements. Previously, this right had only applied to parents of children under the age of 17, or 18 if the child is disabled, and certain carers. Employees will be able to make one written request every year and the employer will need to act on a request within three months. Again, it is a right to request flexible working arrangements and the employer can refuse a request if they have a sound business reason for doing so.

Prosecution of an Australian senior manager

The Australian Capital Territory has become the first Australian jurisdiction to charge an ‘officer’ under their new workplace health and safety legislation. Mr Booth, a 48 year older truck driver, died from electric shock injuries he sustained while operating a tip truck which made contact with a power line. Both the organisation, Kenoss Contractors Pty Ltd, and its senior manager face prosecution for failing to meet primary health and safety duties and failing to exercise due diligence under the Work Health and Safety Act 2011. The senior manager could face a penalty of up to $300,000 for his alleged failure to comply with a health and safety duty, where that failure exposed Mr Booth to a risk of death, serious injury or illness.

The case could have significant implications for New Zealand. The proposed New Zealand Health and Safety at Work Act is largely modelled on the Australian legislation and places similar personal due diligence duties on ‘officers’ to actively manage workplace health and safety. The case highlights that Australian workplace health and safety regulators are prepared to prosecute individuals for failing to meet their obligations as an officer. We will wait to see if a similar approach is adopted by the New Zealand regulator. In particular, the Australian Capital Territory Industrial Court’s analysis of what amounts to a failure to exercise ‘due diligence’ for a ‘C-Suite’ manager will be closely followed.

The senior manager has pleaded not guilty to the charges and the hearing has been set for December 2014.

Reproduced with the kind permission of DLA Phillips Fox