As is well known, the basic general rule is that ‘out of court settlements’ of employment disputes are not legally binding in the sense that they cannot exclude an employee’s right to take the matter in question to an Employment Tribunal. There are some exceptions to this rule. These require specified conditions to be fulfilled. If the conditions are fulfilled then agreement to accept an amount in full and final settlement will be the end of the matter. The agreement will be valid and the courts and tribunals will not entertain a claim based on the same subject matter.
One of the most common exceptions is where the out of court settlement takes the form of a ‘compromise agreement’ satisfying specified statutory conditions. Typically one of the most important conditions is that the employee must have “received advice from a relevant independent adviser as to the terms and effect of the proposed contract and in particular it effect on his ability to pursue his complaint before an employment tribunal”.
Over the years there have been many examples of cases in which employees have sought to bring cases to employment tribunals even though they have signed ‘out of court’ settlements agreeing not to do so. As will be apparent from the notes above such cases are bound fail if the statutory conditions for valid compromise agreements have been complied with so the employee concerned will generally argue than one or other of the conditions referred to above was not properly fulfilled.
This is what happened in a case in May 2010. A substantial number of staff employed by Glasgow City Council settled equal pay claims out of court. Although they signed what the Council considered to be binding agreements that they would not bring in the employment tribunal equal pay claims covering a particular specified period, they changed their minds and tried to do so. Presumably they had received advice after signing the agreements that the amounts they had agreed to take in full and final settlement were less than the amounts they would probably have been awarded if they had taken their cases to the tribunal.
Glasgow City Council put forward the obvious argument that the employment tribunal had no jurisdiction because the staff had signed valid compromise agreements accepting the amounts offered in full and final settlement. The employees, on the other hand, argued that the compromise agreements they had signed were not valid. This, they argued, was because the important condition noted above had not been fulfilled. Although they had received advice from relevant independent advisers, as required, they claimed that as this advice had not included advice on whether the settlement offer put forward by the Council was a ‘good deal’ it did not fulfil the important condition noted above. Glasgow City Council said in reply that this was not what the wording noted above requires. The Council argued that the wording merely requires the adviser to explain what the proposed settlement agreement provides and what its effects would be. This, the Council said, had been done. There was no need for the advice to go further and specifically there was no requirement that it should include advice enabling employees to make informed decisions as to whether to accept or reject a proposed settlement.
The Council won. The employment judge said it was clearly desirable that the advice given to the employees should have been such as to allow them to make an informed decision. However she concluded, “with some reluctance”, that that is not what the statutory wording required. The judge ruled that the compromise agreements signed by the employees were valid and that therefore the employees could not bring claims to the tribunal in respect of the period for which they had already agreed to accept amounts in full and final settlement of those claims.
It should be noted that this is the judgment of an employment tribunal. As such, although of course influential (especially given the seniority of the employment judge who heard the case) the decision does not set a binding precedent.