What does 'Without Prejudice' Mean? Settlement Agreement Law

What does ‘Without Prejudice’ and ‘Subject to Contract’ mean?

In this article, we examine what the phrases 'without prejudice' and 'subject to contract' mean in the context of a settlement agreement, sometimes referred to as ‘exit agreements’, ‘compromise agreements’, or ‘termination agreements’, under Irish employment law.

The main legal impact of a settlement agreement is that it will prevent an employee from bringing any future claim against the employer.

The consequences of such an agreement cannot be overstated, particularly if there is or was a dispute between the parties. 

Although a settlement agreement, is often intended to finalize any employment law dispute between the parties, an employee may also be waiving any other right they have, to bring any legal claim, against their employer. 

The execution of a settlement agreement often comes down to a simple risk assessment and cost-benefit analysis.

For the employer, he or she will be looking at the likelihood of a case being taken against him, the chances of success, and a calculation of a potential award if the claim is successful. To insulate themselves from that risk, they may offer more favourable terms to the departing employee, in return for their agreeing not to pursue any claim or litigation against the employer.

For the employee, he or she may have a legitimate claim against the employer, however, there is never any guarantee of success, when one initiates a workplace claim, particularly before the Workplace Relations Commission. Therefore, he or she may also undertake their own risk analysis and cost-benefit assessment, to determine their own likelihood of success, in bringing a claim, the potential costs involved, as well as the likelihood of an award.

'Without Prejudice' - Making an Offer Private

When a settlement agreement is often put before an employee, it is on the basis that, should the employee refuse to accept it, he or she will be precluded from relying on that proposal, in any form, in any future litigation. 

By marking the document has being ‘without prejudice’ and ‘subject to contract’, an employer prevents the proposal from having any legal standing, until such time as it is executed by both parties, thereby affording both parties, an opportunity to freely negotiate the terms of the agreement, without fear that their respective positions, can be used against him, if any dispute between them, isn’t settled throughout the negotiation process.

Until such time as the agreement is signed by both the employer and employee, it has no legal standing.

Advice on Settlement Agreements

Any employee considering executing a settlement agreement, needs clear and concise advice on the potential consequences of signing such an agreement. In order for them to be fully appraised, they need to know what their potential legal rights are. For that reason, we always advise, that employees obtain their independent legal advice, from a specialist employment solicitor, who is fully aware of all of the potential actions that an employee may take. 

Employee should know what potential complaints they may be in a position to raise, the likelihood of success, the cost of bringing such a claim, and the potential awards. It is only through an understanding of what the alternatives to a settlement agreement are, that an employee can be considered to be fully informed as to the consequences of signing that agreement and waiving their employment rights.

Please click HERE for a downloadable 'Guide to Settlement Agreements under Irish Employment Law'.