The general rule is that informal “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 concerned to an Employment Tribunal. As is well known, one exception to this general rule is a formal “compromise agreement”. Provided it complies with conditions set out in the Employment Rights Act 1996, a formal compromise agreement settling an employment dispute will normally be fully binding on both parties.
The main conditions which must be fulfilled are:-
- that the agreement must be in writing;
- that the employee must have received advice from an approved independent adviser; and
- that the agreement must relate to “particular proceedings”.
This last condition means that a generalised “full and final settlement” agreement cannot be a fully valid compromise agreement (a few years ago the government said it was going to remove this condition but it is still there – and there is no sign of it being removed: those interested may care to look at Hansard HL 30th April 2002, col 572).
An important practical point following the repeal/revocation of previous anti-discrimination legislation by the Equality Act 2010 is that any compromise agreement made after 1st October 2010 should generally ensure that it specifically refers to settling any claims under Equality Act 2010. Of course if, as will generally be the case for many months/years to come, the employment concerned began before 1st October 2010 it should also refer to the previous legislation which will continue to apply in respect of claims arising from events which took place before 1st October 2010.
This is an item from our October 2010 newsletter. If you are interested in subscribing to our monthly newsletter please click here.