+Scott Watson

Sunday, 24 April 2011

Compromise Agreements - McWilliam v Glasgow City Council

Compromise agreements Friday, 15 April 2011
McWilliam v Glasgow City Council

The EAT in Scotland has held that compromise agreements entered into by Glasgow City Council to settle equal pay claims prevented the women affected from pursuing those claims, even though their solicitors had not advised whether or not the settlements on offer were a ‘good deal’. There is no obligation on advisers to comment on the potential value of a claim or assess the likelihood of its success – all that is required is that the employee is advised what the terms of the compromise agreement are and what they mean.

Glasgow City Council were faced with many thousands of equal pay claims and arranged for local lawyers to advise its female staff about their rights under equal pay law. The council then offered compromise agreements to these staff on the basis that the solicitors would act for these employees (not the council) in giving legal advice. The solicitors held a series of mass presentations to advise the female staff about compromise agreements, and offered one-to-one sessions with individuals on their own contracts so that, if they wanted to, they could sign compromise agreements (which stated that they would not bring equal pay claims covering a specified period). The lawyers specifically emphasised that:

* they could not advise on whether or not the deal offered was a good one for the employee concerned
* the employees could not bring a tribunal claim if they concluded a compromise agreement, and
* the employees did not have to sign the agreements that day, and if they were unsure, they shouldn’t sign

The applicable law (at the time) was s. 77 of the Sex Discrimination Act which set out the criteria which must be met for a compromise agreement to be used as a valid and effective means of waiving claims. In particular, it specified that the compromise agreement must relate to a ‘particular complaint’ and that the employee must receive ‘advice’ from a ‘relevant independent adviser as to the terms and effect’ of the agreement before it is entered into.

Ms McWilliam and some of her co-workers did try to bring equal pay claims against the council and the Glasgow tribunal had to decide whether it could hear their claims. This turned on the efficacy of the compromise agreements. The tribunal (ETS 132316/07) unequivocally upheld the validity of the compromise agreements. Ms McWilliam appealed to the EAT and lost.

The EAT held that:

* The term ‘particular complaint’ does not mean that a tribunal complaint has to be lodged before that complaint can be waived under a compromise agreement. What’s more, the complaint does not even need to have been articulated by the employee before the agreement is entered into. What matters, said the EAT, is that both parties know to which particular complaint the compromise agreement relates (i.e. both parties are aware that particular matter cannot be litigated in future) – there doesn’t need to have been a history of dialogue or communication about the complaint.

* The advice offered was ‘independent’ - the fact that the lawyers’ fees were paid by Glasgow Council was standard practice and in no way altered the fact that they were acting for the employees. Also, the fact that the lawyers had met with the council to discuss the logistics for the mass advice sessions was irrelevant.

* When giving advice to an employee on the terms and effect of the compromise agreement, the independent adviser does not need to offer a view as to whether or not the deal on offer is a good one or whether or not the employee should accept the offer given his or her particular circumstances. All that is required is that the employee is advised what the terms of the compromise agreement are and what they mean (e.g. the scope of the claims, what claims are being compromised, how any payment would be treated for tax purposes, etc.).

While this case related to the statutory requirements in the ‘old’ Sex Discrimination Act, these requirements are replicated in other statutory provisions on compromise agreements, e.g. the Equality Act 2010. They are also much the same as those in the Employment Rights Act 1996.

Re-published with kind permission of HRBullets.co.uk

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