Care needs to be taken before settling discrimination claims until legislative fault is corrected.
On 1 October 2010 the Equality Act 2010 came into force and now
governs all aspects of discrimination in employment (age, sex, race
etc). However the drafting of the new legislation puts in doubt the
ability of employers and employees to enter binding compromise
agreements to settle such claims.
Compromise agreements under the Equality Act 2010
To create a binding waiver of an employee’s right to bring statutory
employment claims such as claims for unlawful discrimination the
employee must sign a “compromise agreement” which satisfies certain
conditions set out in statute. A key condition is that the employee
must have taken independent legal advice on the terms and effect of
signing the agreement from an “independent adviser”. However, the
wording of the relevant provision (section 147 Equality Act 2010)
suggests that to qualify as an “independent adviser” advising on a
compromise the lawyer must not have advised the employee on any of the
events leading up to the offer of compromise, such as a grievance, and
even more confusingly they must not have advised on the terms of the
compromise itself – in effect making it very difficult to create an
enforceable compromise of claims made under Equality Act.
The UK government’s Equality Office insists that the Equality Act
2010 has not changed previous rules, under which solicitors regularly
advised employees on grievances and disputes and then advised them on
the terms of compromise agreements. Legal opinions both support and
contradict the government view. All agree that a court ruling or some
other form of official clarification of the correct position is
required.
What can employers do?
This issue only affects claims that arise under the Equality Act
2010. The ability to create a valid compromise of claims such as unfair
dismissal, unlawful deduction from wages and redundancy remains.
Furthermore, certain discrimination claims currently being dealt with by
employers may fall to be considered under the previous legislation
(broadly speaking if the matters complained of took place prior to 1
October 2010, although where relevant detailed advice should be sought
on the transition arrangements). Claims of discrimination arising out
of facts or circumstances that occurred after 1 October 2010 will
however be affected.
Commentary
It is to be hoped that urgent steps will be taken to resolve this
issue. However, until there is clarity, employers need to bear in mind
when considering settling a dispute that involves a claim of
discrimination that they cannot guarantee that the employee will not
benefit from settlement monies and still bring a claim.
Where litigation has not already commenced, a decision to postpone
settlement until proceedings are issued may be advisable as matters can
then be settled using the ACAS conciliation service, which is not
affected by the provisions regarding compromise agreements. ACAS also
offers a pre-claim conciliation service which may be useful in some
circumstances.
If employers are not willing or able to involve ACAS, whose
resources are already stretched, consideration should be given to
structuring agreements such that all or part of compensation is
repayable if proceedings are brought or even withheld until after the
expiry of the time limits for bringing statutory employment claims.
Resources
ACAS conciliation service details are available at the following link:
https://www.acas.org.uk/early-conciliation
For further information or to discuss the issues raised, please get in touch.
