What Does Without Prejudice Mean in a Settlement Agreement?

What is without prejudice?

Many settlement agreement offers have the heading “Without Prejudice”. But what does that mean?

It can be confusing. Some people think it’s an indication of pending court proceedings. Perhaps others think it’s a good way to make a letter sound more threatening.

What does without prejudice mean?

When a letter, email or settlement agreement is “without prejudice”, it means that it can’t be used in evidence if a settlement agreement isn’t reached.

It’s shorthand for “anything I say in this communication won’t prejudice my right to say something different to a court or tribunal”.

The reason for this is that if a court was made aware that you had been offered a sum of money, there is the risk that such an offer would be construed as an admission. The without prejudice rule enables both parties to negotiate freely and try to settle matters out of court without worrying that what they say will be used against them.

Does an offer of settlement have to say without prejudice?

The without prejudice rule is that anything said as an attempt to resolve a dispute can’t be put before a court or tribunal.

How a communication is labelled does not determine what it is. An offer of settlement doesn’t have to say “without prejudice” in order for the without prejudice rule to apply. Similarly, just because a communication is labelled without prejudice doesn’t mean that it is. The issue is simply whether there is a genuine attempt to resolve a dispute.

What’s the difference between a protected conversation and without prejudice?

Strictly, the without prejudice rule only applies if there’s a dispute. This can be unhelpful. Sometimes an employer and employee may want to discuss bringing the employment to an end, even if there’s no dispute.

That’s why the law changed in 2013 to allow employers and employees to have an “off the record” conversation, even when there’s no dispute. This is known as a “protected conversation”. In most cases, a protected conversation has the same legal effect as a without prejudice discussion.

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