Challenge to large scale compromise found in favour of employer

Where disputes involve a large number of employees the employer sometimes decides to engage a firm of lawyers to advise the group, with a view to finalising the situation with compromise agreements which prevent litigation. A challenge against Glasgow City Council regarding their settlement of some 10,000+ equal pay claims has recently been decided in the Employment Appeal Tribunal (“EAT”). The case is relevant to any large organisation which wants to settle a number of potential claims collectively, for example in a redundancy exercise.

When threatened with the potential claims, the council made an offer that it would set aside £40m in settlement and it engaged a panel of six law firms to advise the potential claimants. The advice was carried out through presentations attended by groups of employees, followed by individual meetings at which the employees were advised of the terms of the compromise agreement, as required by law to make the agreements binding.

Some employees who signed a compromise agreement then tried to bring equal pay claims. The Employment Tribunal refused to accept them on the grounds there had been a valid compromise agreement. Before the EAT the claimants said that the compromise agreements were invalid, their first argument being that they did not relate to any ‘particular complaint’. This was rejected, as the parties knew of the potential equal pay dispute and it was not necessary that Employment Tribunal claims were lodged.

The claimants argued that they had not received independent advice because the council had instructed the solicitors. The EAT said that whilst the solicitors were acting on behalf of the group, to protect their collective interests, there had been meetings with each claimant individually, and this satisfied the requirement for each employee to have received advice regarding the terms of the agreement.

Employers are advised, when entering into such a situation, to ensure that the lawyers are completely independent, i.e. do not take instructions on employment issues from the employer and that each employee is able to receive individual advice regarding the terms of the agreement.

For more information on contracts of employment and the effects of particular clauses, or for advice on any other employment issue please contact our employment department on 020 7354 3000 or e-mail employment@colmancoyle.com

Author: Linda Quinn, Associate

Date Published : 16/06/2011