When is a legal adviser not a legal adviser? Based on section 147 of the Equality Act 2010, it appears to be when he is a legal adviser. Confused? Many have been.

At this time of year one’s thoughts often turn to compromise agreements. Yet as some employers kindly decided to allow their employees to spend more time with their families over the holiday break, any concern about how binding that compromise agreement actually is could well make the Christmas pudding hard to swallow. And we don’t want that, do we?

The arrangements required for a binding compromise agreement have, of course, been with us for more than 14 years, and under section 203 of the Employment Rights Act (ERA) 1996 we have known where we stood – agreement in writing (tick), relating to a particular complaint (tick), advice from a relevant independent adviser with a policy of insurance, and so on. But what do we mean by ‘relevant independent adviser’ (aside from being, say, a solicitor)? Well, if a thousand conflict searches (and lost potential clients) haven’t drilled it in to you by now, the section helpfully tells us that you cannot act for the employee on the compromise agreement if you are already acting in the matter for the employer. So far, so straightforward.

The difficulty is that, when it comes to the Equality Act, the draftsmen have got rather carried away. Instead of replicating the wording in section 203 of the ERA, they have become a little bit more ‘encompassing’ in the language, presumably to block a gap of which I for one was not aware. We are now told under section 147(5) that, among other things, a solicitor cannot be an independent adviser if they are a ‘party to the contract or the complaint’ or, more to the point, if they are ‘acting’ for a person ‘who is a party to the contract or the complaint’. Yes, that is what it says, and you could be forgiven for reading that to mean that the lawyer acting for the employee cannot therefore sign off on the compromise agreement. Bizarre.

If this is so, what is to be done? Over the last few weeks this issue has become a kind of sorting hat for employment lawyers. All, of course, agree that a tribunal (or preferably a higher court) will need to interpret the wretched clause at some point, but for now there have been a number of ‘interesting’ solutions put forward (including from the Law Society). For the very conservative, engineering an ACAS form COT3 seems to be the ‘only’ way to get a binding settlement. But this is often far from practicable. For the creative, the suggestion has been that, once the ‘real adviser’ has done the job, the employee should be sent to another ‘independent’ adviser to sign off on the agreement. However, once the second adviser gives the advice required, surely they will also be tainted and will have to in turn send the poor soul off to a third adviser, and so on to infinity (perhaps together with an infinite amount of time and a typewriter this infinite number of lawyers will get section 147(5) right).

In the face of such solutions some have taken a more stoic view. Certainly, the result suggested by section 147 cannot have been the intention of parliament and it must only be a matter of time before the clause is either rewritten or interpreted by an appropriate court. Indeed, more than one leader has hinted that the very case may already have been put into the pipeline by a trade union and employer sympathetic to the cause. Those fortunate enough to receive mailshots from Cloisters will also have been buoyed by the recent missive from Robin Allen QC. Robin, while recognising the need for formal interpretation, sensibly observes that, as the claimant and legal adviser (referred to in section 147) cannot by definition be the same person, the reference in section 147(5), which excludes as an acceptable adviser ‘a person who is a party to the contract or complaint’, cannot be a reference to the complainant, but to some other party. Accordingly, he reasons an adviser acting for such other party cannot mean to refer to an adviser acting for the complainant. Bingo.

While Robin will hopefully forgive me for that inadequate summary, this makes every sense. Section 203 of the ERA bans advisers who also act for the employer. This new section presumably sought to extend that ban to those acting for the employer or anyone else who was otherwise party to the claim (for example, a second respondent from within the workforce). Shame the act did not say that.

So what can be done sensibly? Well, one could just adopt Robin’s view and, based on that, carry on as if nothing has happened (not something he himself recommends) – but one’s insurers don’t seem to like that. One could adopt one of the more impractical solutions above, but then one’s clients aren’t likely to be pleased either. Certainly, clients need to be aware of the risks, but they also need to know that the ‘Allen view’ (or something very similar) is likely to be accepted in any sensible tribunal determination. Further, we can observe that a tribunal, faced with a claim post-compromise agreement is very likely to look askance at the claimant. Questions must surely be raised as to what award would be made where an agreement, upon which independent advice has been given, has already been signed, and certainly any amounts paid should be taken into account as a long-stop hope. Given the broad basis on which damages are awarded in equality claims, however, more perhaps must be done, and for many this has meant doing what we solicitors hopefully do best – drafting in some more failsafes.

How about a repayment or liquidated damages clause – which requires the ex-employee to give the compensation payment back if they bring a claim (usually focuses the mind)? Worried about it being a penalty? Consider, then, a clause allowing any compensation payment to at least be repaid to the extent of any damages awarded (fine in a generous settlement). Why not both? Still concerned? Then perhaps it is time to revisit a very old friend – payment by instalments. If really necessary, go for the old COT3.

In considering these alternative solutions, remember that before 1996 the compromise agreement route was not even available and we survived. Necessity required a range of solutions and one of the simplest was to pay compensation more than three months after termination, provided a claim had not actually been commenced (and was therefore out of time).So, while providing work for an infinite number of us on each agreement may be welcome in these dark days, all is not lost. With a bit of practical thought the more extreme solutions can be avoided.