The risks and penalties of money laundering for charities and how to guard against it
The government has got itself into a real pickle over the section of the Equality Act which deals with compromise agreements. These are the agreements which are used in the vast majority of cases to confirm the resolution of employment disputes and to ensure the employee thereby agrees to withdraw and no longer to pursue claims against the employer. As everyone recalls, the Equality Act was rushed through in the dying days of the last Labour government. It draws together all of the now superseded discrimination statues that went before it. Section 147(5) provides that an independent adviser (required in order for a compromise agreement to be effective) cannot be someone who is a party to the contract or complaint, a person connected to such a person, or a person who is acting for either of these two.
On one view this is plainly ridiculous, as it effectively rules out the vast majority of employment lawyers who are asked to become independent advisers for these purposes. Thus far the government is maintaining the line that this is only a “perceived drafting error” and has declined to say any mistake has been made. They say that Section 147(5) must be read in the context of the earlier sub sections, one of which makes clear that a party to the contract or complaint is a different person to the independent adviser. Unfortunately, this explanation whilst possibly ingenious, appears to ignore the express wording of the offending sub section, and that leaves the law in a real state of uncertainty.
So in default of any further direction from the government, what can we now do to manage the problem? One option is to use ACAS and have a COT3 signed instead of a compromise agreement. Another is to make sure that the proposed settlement monies, or any significant part thereof, are not paid to the employee for a period of three months, following which, in most cases, employees will be out of time for bringing a discrimination claim. A further alternative is to await a clarificatory decision of the Employment Appeal Tribunal, but that may take many months. Another course of action, and one that many organisations including the Employment Lawyers Association have been taking up, is to lobby the government for early clarification and, if necessary, primary legislation to be brought through parliament as soon as the legislative timetable allows, so as to clarify the position. Not to do so risks the ability of the parties to resolve their differences via a compromise agreement, which is the system we have used primarily for this purpose since they were first introduced in 1993. No one, surely, is asking us to go back to the future?!
For more information on Section 147(5) of the Equality Act 2010, please read Richard Fox's article in December's ELA Briefing.
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