Government heeds Law Society advice on compromise agreements

The Government has responded to Law Society calls for clarification about the validity of compromise agreements drafted under the Equality Act.

Compromise agreements are used extensively on termination  of employment, and usually provide for a severance payment by an employer in return for which the employee agrees not to pursue any claim before an employment tribunal.

Section 147 of the Equality Act 2010 set out the requirements that must be satisfied to avoid employment tribunal claims through compromise agreements. Crucially, it stipulated that employees must receive advice from an ‘independent adviser’ about the terms of an agreement.

Law Society President John Wotton commented: “The wording of this section casts doubt on whether a solicitor for the employee could be recognised as an ‘independent adviser’ for the purposes of preparing a compromise agreement. This could have rendered unenforceable any discrimination-related elements of a compromise agreement made following an employment dispute on which the solicitor had up until that point given advice to the employee.

‘Employers would not have been able to safely rely on these agreements without the risk of challenge due to the ambiguity in the legislation.’

The  Equality Act 2010 (Amendment) Order 2012, which comes into effect on 6 April, will amend section 147 by confirming that an employee’s lawyer can be an independent adviser for the purposes of preparing a compromise agreement.

If you are an employer or employee and require advice on any aspect of employment law including compromise agreements then please do not hesitate to Contact us

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