Without Prejudice Discussions – A Quick Guide for N.Z Employers
‘Without prejudice’ (or ‘off-the-record’) discussions are commonly used by employers to explore resolving employment relationship problems confidentially. These often occur where an exit by agreement is being considered to move an employee on from the workplace who is considered to no longer be the right fit, or various other reasons.
When used correctly, these protected conversations can be an effective risk-management tool. When used incorrectly, however, they can significantly increase legal risk exposure and result in costly personal grievance outcomes.
What Are ‘Without Prejudice’ Discussions?
A ‘without prejudice’ discussion allows parties to speak openly about resolving an employment relationship problem, on the basis that what is said cannot later be used as evidence in litigation.
In employment contexts, these discussions are commonly used to:
Explore a mutual exit from employment.
Negotiate a settlement agreement.
Attempt early resolution of a dispute before formal processes escalate.
Importantly, ‘without prejudice’ protection does not arise automatically. It only applies where specific legal requirements are met, which are explained below.
The Legal Foundation – When the Protection Applies?
For a ‘without prejudice’ discussion to be protected under New Zealand law, the following must generally exist:
A genuine employment relationship problem or dispute: There must be a real issue that could reasonably give rise to litigation (e.g. performance concerns, disciplinary issues, grievance correspondence).
Informed agreement by the employee: The employee must understand:
What ‘without prejudice’ means.
That participation is voluntary.
That they can seek independent advice or representation.
Correct structuring of the discussion: Simply labelling a meeting or document ‘without prejudice’ is not enough. The surrounding circumstances and conduct of the employer are critical.
Where these requirements are not met, the discussion may be treated as on-the-record, with potentially serious consequences since what was discussed may be used against the employer.
Employer Pro has a comprehensive Employer Toolkit available for managing ‘Employee Exits and Mediations’ including step-by-step guidelines for holding ‘without prejudice’ discussions, practical employer-focused walk-throughs, legal commentary, various employer-focused templates letters and a section 149 settlement agreement template and more.
Common Employer Risks
‘Without prejudice’ discussions frequently go wrong where employers:
Attempt to use them as a shortcut to dismissal and do not structure them correctly.
Raise matters of concern without any documented issue.
Fail to clearly explain the nature of the discussion to the employee.
Pressure employees to make immediate decisions without ensuring access to advice or representation.
These missteps often result in findings of unjustified dismissal or constructive dismissal.
Case Law Illustration
Hansen v Shipco Transport Limited & Anor [2023] NZERA 679
The employee was called to a meeting, told “this isn’t working out”, presented with a settlement agreement ending his employment that day, and instructed to leave. There had been no prior performance concerns or formal process.
The Authority held that the meeting was not protected by without prejudice privilege. There was no genuine dispute and no informed consent. The employee was found to be unjustifiably dismissed.
The employer was ordered to pay over $148,000 in financial remedies and penalties.
Employer Takeaway: Employers need to be extremely careful when holding ‘without prejudice’ discussions with employees. Always ensure there is written correspondence as a minimum on the record about whatever the issues of concern are the employer has in respect of an employee.
There needs to be a genuine dispute, problem or risk of litigation to trigger holding an off-the-record conversation with an employee. The employee should be formally invited to a discussion for that purpose, including explaining everything of relevance to the employee in advance and giving them an opportunity to seek independent advice and/or representation.
Practical Examples
High-risk Scenario: An employer calls an employee into a meeting and says, “This conversation is without prejudice – we think it’s best you leave today and here’s a settlement agreement.”
Low-risk Scenario: An employer first documents performance concerns or receives grievance correspondence, then formally invites the employee to a ‘without prejudice’ meeting, referring to those matters, clearly explaining the purpose, their rights, and allowing time for independent advice.
Managing Without Prejudice Discussions Safely
Employers should:
Ensure there is documented evidence of a genuine issue.
Invite the employee in writing to a without prejudice discussion.
Clearly explain the meaning and consequences of the discussion. Mark the correspondence ‘without prejudice’.
Notify the employee of their legal rights, including independent advice and representation.
Allow reasonable time for independent advice.
Request the employee confirms their understanding and agreement to participate in a without prejudice discussion.
Keep all follow-up correspondence marked without prejudice.
Where agreement is reached, outcomes are usually recorded in a section 149 settlement agreement, which provides final and binding resolution. This document needs to be lodge with Mediation Services and certified by an independent mediator.
Employer Pro regularly assists employers with navigating ‘without prejudice’ discussions, drafting settlement agreements and lodging settlement agreements with Mediation Services on behalf of employers.
Interaction with Mediation
Mediation (particularly MBIE mediation) provides automatic statutory confidentiality and is often a safer alternative where:
There is no clear dispute yet.
Power imbalance is a concern.
The employer wants stronger legal protection.
Many disputes resolve at mediation without progressing to the Authority.
Proposed Law Change – Easier ‘Protected Negotiations’
The proposed Employment Relations (Termination of Employment by Mutual Agreement) Amendment Bill would allow employers to initiate protected negotiations about termination even where no dispute exists.
If enacted:
Such discussions would be automatically inadmissible in personal grievance proceedings; and
Employers would have greater flexibility to explore agreed exits.
However, as with any new legislation, interpretation risks and test cases are likely. Until the law changes, employers should continue to follow existing best-practice procedures.
Employer Takeaways
‘Without prejudice’ discussions are a powerful but high-risk tool.
Protection only applies where a genuine dispute and informed consent exist.
Mismanagement can result in significant financial liability.
Mediation remains a safer, structured alternative in many cases.
Even if the law changes, careful process may remain advisable due to the potential for disputes and test cases.
Compliance Warning
‘Without prejudice’ discussions carry significant legal risk if not managed correctly. Employers cannot rely on labels or informal conversations to obtain protection. Unless there is a genuine employment relationship problem, informed employee consent, and a properly structured process, discussions about exit or settlement may be fully admissible and relied on to support findings of unjustified or constructive dismissal.
Attempting to use ‘without prejudice’ discussions as a shortcut to termination, presenting settlement outcomes as predetermined, or applying pressure for immediate agreement can expose employers to substantial financial orders and remedies.
Mediation remains the safest mechanism for confidential resolution, and until proposed legislative changes are enacted, employers should approach off-the-record discussions cautiously and with professional support.
This article is provided for general information only and does not replace professional advice. Employers should seek advice specific to their circumstances from Employer Pro if in doubt on their matters pertaining to employee exits, without prejudice discussions and settlements. Employer Pro has a range of employer focused resources and services available through our competitive Employer Protection Packages.
Employer Pro Limited – Empowering Employers Through Effective People Solutions
