The EA has been in force for roughly one month and it is already experiencing some turbulence. Not from Duncan Bannatyne’s rantings in the Daily Mail but from the effect of some sloppy drafting. The problem concerns the drafting of s.147(5) of the Act, which deals with compromise agreements.
The offending section says;
“ none of the following is an independent adviser in relation to a qualifying compromise contract:
(a) a person who is a party to the contract or the complaint; and
(d) a person who is acting for a person within paragraph (a) in
relation to the contract or the complaint . . .”
The problem is that this clause precludes the solicitor who acted for the Complainant prior to the drafting of the compromise agreement advising the employee on the terms of the agreement and thus, crucially, preventing him/her from signing the adviser’s certificate that is required to make it a legally binding agreement. Even a solicitor who advises solely on the terms of the agreement is unable to validly sign the adviser’s certificate, according to advice the Law Society has received from Counsel. The Law Society is seeking an urgent meeting with the Government Equalities Office (who don’t see a problem existing) to try and resolve the issue.
So what? Is this just a nice lawyer’s argument or is it a real problem? It’s the latter: this has very significant implications for the settlement of disputes under the EA, particularly for employers. If disputes can’t be settled by the parties entering into a compromise agreement then it leaves only two other options: one is to fight the case all the way at an Employment Tribunal so that a finding is made or, secondly, ET proceedings are commenced and settled via ACAS under its COT3 procedure. The first option is catastrophic in terms of the costs and time that would be wasted if the parties were minded to settle and the second is better, but not greatly.
Without a legally binding compromise agreement, employers dare not settle claims because there would be nothing to stop an employee from taking the money and then still suing the employer. Possibly a warranty could be included in the agreement to say that the employee would not do that, but that is not a formal waiver and the warranty will be fairly worthless if the employee has already spent the money.
For employees the issue is more one of frustration: disputes won’t settle and thus the aggro and inconvenience of the dispute will continue.
Let’s hope the Government sees sense and the draftsman of s.147 is hanged drawn and quartered (ok, a bit harsh, perhaps commute that to a stiff telling off?)
STOP PRESS – 3rd November 2010
For a very useful follow-up on the above points and why actually all may not be lost, read this article by Martin Searle Solicitors. It contains a summary of the advice given by Robin Searle QC of Cloisters Chambers and also Daniel Barnett (another barrister, from 1 Temple Gardens) on why, with caution, compromise agreements may still be used. Undoubtedly though the whole situation is uncertain and needs to be clarified as soon as possible.