A risky compromise?
November 26, 2010
A drafting problem in the Equality Act 2010 means that there is a risk that it is not possible to validly settle claims under the Act using a Compromise Agreement. The Equality Act came into force on 1 October 2010 and applies to any discrimination claims arising since 1 October, or to ongoing issues that started before that, provided that they have continued beyond that date.
A Compromise Agreement is a document where an employee agrees not to bring claims against their employer in exchange for a settlement figure. There are certain statutory requirements for Compromise Agreements, including the fact that the employee has to have independent advice on the terms and effect on the agreement in order for it to be valid.
The problem with the drafting of the Equality Act is in the definition of an independent adviser. Some people fear that the definition of an independent adviser in the Act excludes anyone who has acted for the employee. Anyone who advises the employee on the terms of the Compromise Agreement would therefore be acting for the employee, and so if that interpretation is correct, the employee would not have had independent legal advice and the Compromise Agreement would not be enforceable. This would mean that the employee would not be prevented from bringing claims.
The Law Society was sufficiently concerned about this issue to seek legal advice in its own right, and was advised that this interpretation is correct. The Law Society is therefore pressing the Government Equalities Office for an urgent amendment to the legislation.
The Government Equalities Office have confirmed that it is their view that the Act does not affect the previous position and Compromise Agreements can be used as before. The problem is that it is not up to them – it is the courts who would be asked to interpret legislation, and where the wording is clear, they cannot go against it.
The question is – is the wording clear? Some people believe that it is not – and any ambiguity allows the court to look at the context of the provision, and the intention of Parliament, when interpreting it. Clearly Parliament would not have intended to invalidate Compromise Agreements, particularly as the relevant provision deals with the statutory requirements for Compromise Agreements to be valid.
If Compromise Agreements are not an effective way of settling discrimination claims, then the alternative method is to settle claims through ACAS, using their settlement agreement which is called a COT3. Although ACAS do occasionally help parties to settle before a Tribunal claim is issued, in most cases it will only do so where a Tribunal claim has been brought. This means that the settlement would become much more complicated and long-winded – and the delay might jeopardise a fragile settlement deal.
Until we have a decided case, or until the legislation is amended, there is no definitive answer. Until then, employers need to take advice on their specific situation and decide the best solution for them.
Are you dealing with a Compromise Agreement at the moment? If you are, or if you need advice on any aspect of employment law, please contact any member of the Pure Employment Law team 01243 836840 or enquiries@pureemploymentlaw.co.uk