Does Simply Marking a Letter “Without Prejudice” Make It Confidential?

One of the biggest misconceptions in employment disputes is that a person can simply write “Without Prejudice” on a letter or email and prevent it from ever being used as evidence.

That is not how the law operates.

The words themselves do not create legal privilege.

Rather, they are an indication that the sender intends the communication to form part of confidential settlement negotiations. Whether the communication is actually protected depends on its substance and the surrounding circumstances, not merely the label attached to it.

For the without prejudice rule to apply, there must generally be a dispute between the parties and a genuine attempt to resolve that dispute by negotiation or compromise. The protection exists because public policy encourages parties to settle disputes without fear that concessions made during negotiations will later be used against them in court or a tribunal.

Importantly, the protection is mutual.

The privilege belongs to both parties, not just the person who sent the correspondence. Because it is a joint privilege, one party cannot usually waive it without the consent of the other. Likewise, one party cannot simply declare that a communication is without prejudice if the other party has not engaged in settlement discussions or if the communication is not genuinely directed towards resolving the dispute.

For example, if an employer sends a disciplinary letter headed “Without Prejudice” demanding that an employee resign, the heading alone is unlikely to prevent that document from later being tendered in evidence. The letter is not a genuine settlement negotiation; it is simply part of the employer’s ordinary management process.

Similarly, if an employee writes a grievance letter and labels it “Without Prejudice”, that label does not automatically cloak the contents with privilege. If the letter is merely setting out allegations or asserting legal rights, rather than proposing a compromise, it will usually remain admissible.

The courts look beyond the heading and ask questions such as:

• Was there already a dispute between the parties?

• Was the communication made in an attempt to negotiate a settlement?

• Were both parties participating in settlement discussions?

• Was there a genuine willingness to compromise?

Only if those questions are answered positively will the communication generally attract without prejudice protection.

Mutual Acceptance and the Nature of the Negotiation

Although it is often said that without prejudice communications require “mutual acceptance”, that phrase can be misleading.

The better way to understand the principle is that without prejudice privilege arises from the mutual nature of settlement negotiations, not from one party’s unilateral declaration.

The recipient does not need to expressly reply, “I accept this is without prejudice.” However, there must be an objective basis for concluding that both parties were engaged in confidential negotiations aimed at resolving the dispute.

For example:

• An employer emails an employee stating, “Without Prejudice, we are prepared to offer six months’ salary if you agree to resign and release all claims.” The employee responds by negotiating the amount and suggesting amendments to the proposed settlement terms. In this scenario, both parties have objectively entered into settlement negotiations, and the communications will ordinarily be protected.

By contrast:

• An employer sends a letter marked “Without Prejudice” accusing an employee of misconduct and directing them to attend a disciplinary meeting. The employee does not engage in settlement discussions because none have been proposed. The letter is simply part of the disciplinary process. The words “Without Prejudice” add nothing, and the document is likely to remain admissible.

Why This Matters in Employment Disputes

This distinction is particularly important in employment matters before the Fair Work Commission, the Federal Courts, and state tribunals.

It is not uncommon to see employers incorrectly label:

• show cause letters;

• disciplinary correspondence;

• investigation findings;

• performance management documents; or

• termination letters,

as “Without Prejudice” in the mistaken belief that this prevents them being relied upon in later proceedings.

In most cases, it does not.

Conversely, where both parties are genuinely negotiating an exit package, a deed of settlement, compensation payment or other compromise, the without prejudice rule plays an important role in encouraging frank discussions that cannot ordinarily be used against either party if negotiations fail.

The practical lesson is simple:

“Without Prejudice” is a rule protecting genuine settlement negotiations—not a magic label that makes inconvenient documents disappear. Courts and tribunals will always examine the substance of the communication, rather than the heading placed upon it.