When one adviser may not be enough

When one adviser may not be enough – the new compromise agreement quandary!

It is common practice for employers to ask employees who might make a claim against them to sign a compromise agreement. The reason for this is that when legally binding, compromise agreements prevent employees from making claims against their employers.

Various acts of parliament and regulations confirm what has long been the law – that a compromise agreement is not legally binding unless the employee signing has been legally advised on the agreement by an “independent adviser” – most often a solicitor.

Then along came the Equality Act 2010…

The Equality Act 2010 came into force on 1st October 2010. It was designed to replace the various acts and regulations on discrimination law. There was no known intention on the part of the government to change the law on compromise agreements.

It was surprising then to find section 147 of the Equality Act 2010 appearing to exclude an independent adviser (such as a solicitor) who was already advising an employee on an employment dispute, from advising the same employee on a compromise agreement when discrimination claims were at stake.

The surprising anomaly is of no concern to employees who sign a compromise agreement, because they do not care whether their claims are properly compromised or not. However, for an employer at risk of a discrimination claim the position is quite different. He will only be interested in offering a compromise agreement to his employee if he can be sure of eliminating any discrimination claims that may exist.

Section 147 of the Equality Act has now been considered by some of the finest legal brains in the land. The unanimous conclusion appears to be that the Equality Act 2010 does not mean what it appears to say. If the experts are right, there should be little or no risk in offering a compromise agreement to an employee who is being advised on the agreement by a solicitor who is also advising on his employment dispute. 

To comment on this article or if you would like further Employment Law advice on compromise agreements, please contact Jenny Kinman who specialises in Employment Law by clicking here