Compromise Agreements (“CAs”) have been with us nearly fifteen years and most people are now familiar with the idea that they provide a mechanism by which employers and employees can settle claims in relation to an employee’s statutory rights, thereby stopping an employee making a Tribunal claim later. They are a valuable part of the landscape in this area. Under the laws that relate to Unfair Dismissal nothing much has changed with the arrival of the Equality Act 2010 but as the new Act seeks to bring under one roof all the statutory law regarding discrimination so the rules about CAs in discrimination have been lightly tinkered with.
Unfortunately, there has been one serious adverse unintended consequence. This is how. To make a Compromise Agreement effective under the Equality Act 2010 when settling, broadly, discrimination claims certain conditions have to be fulfilled.
One of these conditions is that an independent adviser must have given advice to the employee about the terms and effect of the agreement. An independent adviser is defined by the Act : so, for example, solicitors and certain trade union officials qualify as independent advisers. Then the Act lists certain people who might otherwise qualify as independent advisers but who are nevertheless disqualified. Not surprisingly “a party” to the agreement cannot qualify as an independent adviser. This means that a solicitor about to sign a CA, having been sacked, say, from a firm of solicitors, cannot be the independent adviser and advise himself - which seems eminently prudent. Others connected with or employed by a party to the agreement are others also excluded.
And then, in this list of disqualified persons, there is “a person who is acting for” a party to the agreement. It follows as night follows day that an independent adviser is indeed acting for a party to the agreement, the complainant. So this looks like a mistake in the wording of the Act. Its effect is to prohibit an independent adviser validly being an independent adviser, a concept which takes a bit of getting used to. It is possible that if tested in court a way round it may be found because it is so obviously an unintended mistake.
However, on the face of it, it presents problems for employers (and their advisers) trying to settle claims made under the Equality Act. If no adviser can be an independent adviser because necessarily he is “acting for” the employee it means that no CA can be effective for preventing an employee later bringing a claim of the sort that it is intended should be settled by the CA.
Such cases will need special attention to obviate the risk of any CA not being the shield against further Tribunal action that an employer seeks. Certain strategies can be developed to get round the problem but until the courts find a way round the problem or until the law is amended employers need to engage one or more of these strategies which will make a relatively simple process somewhat more cumbersome.
