UK: Ability to compromise discrimination claims under the Equality Act 2010 in doubt

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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:
http://www.acas.gov.uk/index.aspx?articleid=2010

For further information or to discuss the issues raised, please contact Colina Greenway (colina.greenway@abbisscadres.com) on +44 20 3051 5711.