Settlement agreements validly precluded equal pay claims

In the case of McWilliam & ors v Glasgow City Council UKEAT 0036_10_1003 the Employment Appeal Tribunal (“EAT”) was asked to determine three questions: 1) whether the settlement agreements had validly settled equal pay claims that could otherwise be brought?; 2) whether the claimants had “received advice” from an “independent adviser”?; and 3) whether the solicitors who had advised the claimants had been “acting in the matter for the Respondent”? The EAT dismissed the appeal, answering “no” to questions 1 and 3, and “yes” to question 2.

In November 2005 a group of six employees (“the Claimants”) signed settlement agreements that entitled them to be paid various compensation payments by Glasgow City Council (“the Respondent”). About 10,500 employees of the Respondent had access to settlement agreements in 2005 and 2006.

The process of the signing of the settlement agreements in 2005 was more complex than is generally usual for settlement agreements, due to the number of the Respondent’s employees who required advice on the agreements: the Respondent put out a tender for law firms who were interested in (and able to) provide legal advice to a substantial number of potential clients in a short period of time. Fifteen firms registered an interest and a panel of six firms was formed. It was agreed that the Respondent would pay the solicitors’ fees (£1,000 plus VAT per adviser – up to a maximum of 5 – for attending and advising clients at 3 sessions) and that the fees would be paid irrespective of whether or not the individual employee agreed to enter into the settlement agreement.

A draft settlement agreement was provided to the firms of solicitors and the firms of solicitors proceeded to negotiate various terms of the agreement on behalf of their clients. One firm of solicitors, McGrigors, decided that they would not be able to advise employees on the specific nature of their claims against the Respondent due to the lack of precise information provided, and therefore limited the advice provided to advice on the terms and effect of the settlement agreement (after receiving advice from the Law Society of Scotland that this was sufficient to meet their obligations).

There was a group meeting where the solicitors took the Claimants through a Power Point presentation and explained the terms and effect of the agreement to them. It was also explained to the Claimants that the solicitors could not advise on whether each employee had a valid equal pay claim or not and, if they did, what its value was. The Claimants signed the agreement, as did many of their colleagues.

In 2010 the Claimants sought to bring Employment Tribunal equal pay claims against the Respondent. The Claimants were a representative sample of a much wider group of Claimants who had also brought Employment Tribunal claims against the Respondent. The Respondent argued that the Claimants’ claims should be struck out as they had been settled by the 2005 settlement agreements and, at a preliminary hearing, the Employment Judge struck out the claims as having been settled by the Claimants’ settlement agreements, as the wording of the settlement agreement was sufficiently clear to settle the equal pay claims.

The Claimants appealed to the EAT on three bases:

That no particular complaint had been settled by the settlement agreements, as no proceedings had been lodged at the time that the settlement agreements were entered into (“the First Ground”); and
That the solicitors for the Claimants were ‘acting in the matter’ for the Respondent, as they were on a panel and being paid by the Respondent (“the Second Ground”); and
That the Claimants had not “received advice” from “independent advisers”, as the advice had been limited to advice on the terms and effect of the settlement agreement (“the Third Ground”) (together “the Grounds”)

The Claimant argued that, individually or cumulatively, the Grounds were sufficient to render the settlement agreements that they had signed invalid and unenforceable.

The EAT rejected the argument that proceedings would have to have been lodged before the signing of the settlement agreement in order to settle a particular claim – what matters is that both parties knew to what particular matter the settlement agreement related and, in the circumstances, the Claimants were aware that they were settling an equal pay claim.

With regards to the Second Ground, the EAT rejected the argument that the solicitors were acting in the matter for the Respondent: the firms of solicitors were acting to protect the employees’ interests as a group and consulted with them individually in meetings, where the employee was provided with advice – this was the case with the Claimants.

The EAT also rejected the argument that the Claimants had not received advice on the terms and effect of the agreement: it was clear that the solicitors had provided the employees with information at the group presentation and with individual advice at the individual meetings. This was enough to satisfy the statutory requirements for a settlement agreement. It was not necessary, as the Claimants argued, to advise them on whether each settlement agreement was a good one for them personally, as this was not required by section 77 of the Sex Discrimination Act 1976 (NB: this statute has now been replaced by section 146 of the Equality Act 2010).

Chris Hadrill, a specialist employment solicitor at Redmans, commented on the case: “This case confirms that it is not necessary for individual advisers to advise on the prospects of success of any claim that an employee has, although many advisers do offer such advice. If you need to get advice on a settlement agreement then you should ensure that you make it clear to your solicitor that not only do you require legal advice on the terms and the effect of your settlement agreement, but that you also require advice on the prospects and value of your individual claims.”

The original judgment can be found here: http://www.bailii.org/uk/cases/UKEAT/2011/0036_10_1003.html