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Settlement Agreements and the Equality Act
A settlement agreement is a legally binding agreement by which an employee undertakes to refrain from instigating Employment Tribunal (ET) proceedings against his or her employer or, if proceedings have already commenced, to discontinue them, in return for consideration.
Section 147 of the Equality Act 2010, which came into force on 1 October 2010, sets out the conditions that must be met in order to have a qualifying settlement agreement to settle claims arising under the Act. Under the preceding legislation, one of the requirements for an agreement to be valid was that the employee must have received advice from a relevant independent adviser as to the terms and effect of the proposed agreement and, in particular, its effect on his or her ability to pursue a claim before the ET.
The way Section 147 was drafted, however, raised doubts as to who qualified as a relevant independent adviser in relation to a compromise agreement over discrimination claims, as the literal wording seemed to provide that an adviser who had acted for an employee with regard to the contract or complaint would not qualify as an independent adviser in respect of any settlement agreement reached. As drafted, this meant that the employee’s own solicitor would not qualify, whereas previously only an adviser to the other party was excluded.
The Government has now taken steps to clarify the position. From 6 April 2012, the Equality Act 2010 (Amendment) Order 2012 makes amendments to Section 147 to make it clear that a complainant’s legal adviser is not precluded from being an independent adviser to the complainant.
Click here for a guide to the Equality Act for employers.
Settlement agreements can be a useful way of avoiding litigation and achieving certainty, provided they are drafted properly so that all potential future claims are compromised. If you are contemplating entering into such an agreement, we can assist you.