Government Corrects Compromise Agreement Clause

A flaw in the Equality Act 2010 that meant compromise agreements could be "unenforceable" according to employment lawyers has been amended.

Compromise agreements are intended to act as an employment tribunal equivalent of an out-of-court settlement, with an employer paying an employee a financial settlement in exchange for the employee being unable to pursue a discrimination claim.

The Law Society, shortly after the enactment of the 2010 Act, argued the requirement for an independent lawyer "undermines compromise agreements", given it meant a solicitor the claimant had earlier instructed could not be considered independent.

This could have permitted an employment tribunal to strike down an agreement written by a claimant's own solicitor as non-compliant, and allow a case to be heard. The Law Society's own advice states that this has occurred "in analogous cases under the Employment Rights Act 1996".

This risked putting increased pressure on dispute resolution services such as ACAS and employment tribunals. The Government Equalities Office (GEO), the department responsible for equality policy, dismissed the criticism at the time, saying its legal team "does not agree with the Law Society's interpretation of section 147(5) of the Equality Act 2010".

The Law Society later moderated their position, saying they were neutral on the amendment - although they retained the position that the ambiguity should be cleared up. Bodies including the Confederation of British Business, Confederation of British Industry and Trades Union Congress all raised concerns during the Government's November 2011 Raising Workplace Disputes consultation, even though this was not a specified area of discussion.

The amendment, which comes into force on April 6 2012, alters the wording to make clear that someone acting on behalf of the claimant can be considered an independent advisor, while someone acting on behalf of any other party cannot.

The Government estimates the amendment could save employers thousands of pounds for each employment tribunal case that is avoided. HR professionals and employment lawyers have welcomed the move.


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