Legal advice on settlement payments.

[PetraM]

A friend's employer is reorganising and his role is redundant but the employer wants to maintain an illusion with clients that staff are retiring, etc. not being made redundant, so it's being done under a settlement agreement.

He asked me if I'd ask the experts on here about this.

Apparently, it's normal/required to get legal advice before signing a settlement agreement. Where the agreement is amicable, who normally pays for that advice?

I.e., can my friend expect his employer to pay or will he have to?

[Slarti]

http://www.thisismoney.co.uk/money/guid ... -deal.html

Says it is customary for the employer to pay, but your friend should choose the solicitor and it should be one who specialises in employment law.

HTH
Slarti

[pochisoldi]

Apparently, it's normal/required to get legal advice before signing a settlement agreement. Where the agreement is amicable, who normally pays for that advice?

I.e., can my friend expect his employer to pay or will he have to?

There is a requirement to get legal advice before contracting out of statutory employment rights:

Employment Rights Act 1996 Section 203 (3)

3)For the purposes of subsection (2)(f) the conditions regulating [F8settlement] agreements under this Act are that—
...
(c)the employee or worker must have received advice from a relevant independent adviser as to the terms and effect of the proposed agreement and, in particular, its effect on his ability to pursue his rights before an employment tribunal,

As far as "who pays" - the Act is quiet, but I would expect that the usual answer is whoever has the biggest interest in having the agreement signed and valid - usually the employer. (In my one and only experience of signing such an agreement, the employer paid the bill to a solicitor of my chosing directly, probably the easiest £250 the solicitor ever made.)

PochiSoldi

[PetraM]

Thanks, I'll pass that on.

[dspp]

Thanks, I'll pass that on.

I'll second the comments below. I've had to take legal advice on this in the very recent past. Independent legal advice should be made available. It should be paid for by the employer. The advisor should be selected by the employee. There is no cap on fees.

regards, dspp

[Clitheroekid]

Apparently, it's normal/required to get legal advice before signing a settlement agreement. Where the agreement is amicable, who normally pays for that advice?

I.e., can my friend expect his employer to pay or will he have to?

As has been said, it's a compulsory requirement. However, it's largely for the employer's benefit, as once the agreement's been signed they know they aren't at risk from claims for unfair dismissal, discrimination etc, which could run into tens or even hundreds of thousands of pounds.

As the agreement effectively provides them with a dirt cheap insurance policy it's only right that the employer should pay for it.

It's also a requirement that the adviser providing the advice must carry professional indemnity insurance, in case the advice turns out to be negligent.

In my one and only experience of signing such an agreement, the employer paid the bill to a solicitor of my choosing directly, probably the easiest £250 the solicitor ever made.

Hollow mirthless laugh! On the contrary, it's nowhere near enough in many cases.

In order to advise on the terms of the agreement the solicitor has to obtain full details of the employee's contract of employment (including any perks), his pension entitlement and his employment / disciplinary history.

In a redundancy case he then has to consider the actual redundancy procedure and whether it complies with the (complicated) rules regarding consultation etc. He may also have to consider the extent to which the payment is tax-free (not all such payments are) and whether there are any possible claims under discrimination law etc.

Here's a list of the claims in a typical agreement that I have to confirm my client will not make :

The following claims arising from the Employee’s employment or the termination of employment:

1. Under the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRA):
(a) sections 68 (deduction of unauthorised subscriptions)
(b) section 86 (exemption or objection to contributing to political fund)
(c) section 137 (refusal of employment on grounds related to union membership)
(d) section 145A (inducements relating to union membership or activities)
(e) section 145B (inducements relating to collective bargaining)
(f) section 146 (detriment on grounds related to union membership or activities)
(g) section 152 (dismissal on grounds related to union membership or activities)
(h) section 153 (selection for redundancy on grounds related to union membership or activities)
(i) section 168 (time off for carrying out trade union duties)
(j) section 168A (time off for union learning representatives)
(k) section 169 (payment for time off for union learning representative activities)
(l) section 170 (time off for trade union activities)
(m) section 191 (termination of employment during protected period)
(n) section 192 (failure to pay remuneration under a protective award)
(o) sections 238 and 238A (dismissal connected to industrial action)
(p) paragraph 156 of Schedule A1 (detriment on grounds related to union recognition, bargaining or voting)
(q) paragraph 161 of Schedule A1 (dismissal on grounds related to union recognition, bargaining or voting)
(r) paragraph 162 of Schedule A1 (selection for redundancy on grounds related to union recognition, bargaining or voting)

2. Under the Employment Rights Act 1996 (ERA):
(a) section 8 (right to itemised pay statement)
(b) section 13 (right not to suffer unauthorised deductions)
(c) section 15 (right not to have to make payments)
(d) section 28 (right to guarantee payment)
(e) Part V (protection from suffering detriment)
(f) Part VI (time off work)
(g) Part VII (suspension from work)
(h) section 63F (request in relation to training and study)
(i) section 80(1) (in relation to the postponement, attempted prevention or prevention of parental leave)
(j) sections 80F and 80G (duties in relation to an application for a change in terms and conditions of employment for flexible working)
(k) section 92 (right to written statement of reasons for dismissal)
(l) Part X (unfair dismissal)
(m) section 135 (right to a redundancy payment)

3. Any claim under the Protection from Harassment Act 1997

4. Under the National Minimum Wage Act 1998:
(a) section 10 (worker’s right of access to records)
(b) section 23 (right not to suffer a detriment)

5. Under section 10 (right to be accompanied) of the Employment Relations 1999

6. Under Part 5 of the Equality Act 2010:
(a) Direct discrimination;
(b) Discrimination arising from disability
(c) Indirect discrimination
(d) In respect of the duty to make adjustments
(e) Harassment
(f) Victimisation
(g) In relation to the:
(i) effect of a non-discrimination rule
(ii) effect, or a breach, of an equality clause or rule
(iii) enforceability of a contractual or non-contractual term

7. That the Employer instructed, caused, induced or knowingly aided any act which is unlawful under the Equality Act 2010.

8. Under the Working Time Regulations 1998:
(a) regulations 10(1) and (2) (daily rest)
(b) regulations 11(1), (2) and (3) (weekly rest period)
(c) regulation 12(1) and (4) (rest breaks)
(d) regulation 13 (entitlement to annual leave)
(e) regulation 13A (entitlement to additional annual leave)
(f) regulation 14(2) (entitlement to compensation related to entitlement to leave where worker’s employment terminated during leave year)
(g) regulation 16(1) (payment in respect of periods of annual leave)
(h) regulation 24 (compensatory rest where worker required to work during rest period or rest break)
(i) regulation 24A (adequate rest for mobile workers where relevant parts of regulations 10, 11 and 12 are excluded)
(j) regulation 27(2) (compensatory rest for young workers where there has been a force majeure)
(k) regulation 27A(4)(b) (compensatory rest for young workers under other exceptions)

9. Under regulation 19 (detriment relating to pregnancy, maternity or parental leave) of the Maternity and Parental Leave etc Regulations 1999.

10. Under the Transnational Information and Consultation Regulations 1999:
(a) regulation 25 (right to time off for members of a European Works Council)
(b) regulation 26 (right to remuneration for time off)
(c) regulation 31 (right not to suffer a detriment)

11. Under the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000:
(a) regulation 5 (less favourable treatment on the grounds of being a part-time worker)
(b) regulation 7(2) (right not to be subjected to a detriment)

12. Under the Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002:
(a) regulation 3 (less favourable treatment on the grounds of being a fixed-term employee)
(b) regulation 6(2) (right not to be subjected to a detriment)
(c) regulation 8 (successive fixed-term contracts)
(d) regulation 9 (right to receive written statement of variation)

13. Under regulation 28 (detriment relating to paternity or adoption leave) of the Paternity and Adoption Leave Regulations 2002

14. Under the Merchant Shipping (Working Time: Inland Waterways) Regulations 2003:
(a) regulation 10 (entitlement to adequate rest)
(b) regulation 11 (entitlement to annual leave and payment for leave)

15. Under the Fishing Vessels (Working Time: Sea-fishermen) Regulations 2004:
(a) regulation 7 (entitlement to adequate rest)
(b) regulation 11 (entitlement to annual leave and payment for leave)

16. Under the Information and Consultation of Employees Regulations 2004:
(a) regulation 27 (right to time off for information and consultation representatives)
(b) regulation 28 (right to remuneration for time off)
(c) regulation 32 (right not to suffer a detriment)

17. Under regulation 13 (duty to inform and consult representatives) of the Transfer of Undertakings (Protection of Employment) Regulations 2006

18. Under the Occupational and Personal Pension Schemes (Consultation by Employers and Miscellaneous Amendment) Regulations 2006:
(a) schedule, para. 2 (right to time off for functions as a representative)
(b) schedule, para. 3 (right to remuneration for time off for functions as a representative)
(c) schedule, para. 8 (right not to be subject to a detriment)

19. Under the Companies (Cross-Border Mergers) Regulations 2007:
(a) regulation 43 (right to time off for members of special negotiating body etc.)
(b) regulation 44 (right to remuneration for time off in capacity as member of special negotiating body)
(c) regulations 49 or 50 (right not to be subject to a detriment)

20. Under the Cross-border Railway Services (Working Time) Regulations 2008:
(a) regulation 3 (entitlement to daily rest)
(b) regulation 4 (sole driver’s entitlement to break)
(c) regulation 5 (breaks for drivers)
(d) regulation 6 (breaks for other drivers)
(e) regulation 7 (entitlement to weekly rest)

21. Under the European Public Limited-Liability Company (Employee Involvement) (Great Britain) Regulations 2009:
(a) regulation 26 (time off for membership of a special negotiating body)
(b) regulation 27 (remuneration for time off)
(c) regulation 31 (detriment for membership of a special negotiating body)

22. Under the Employment Relations Act 1999 (Blacklists) Regulations 2010:
(a) regulation 5 (refusal of employment relating to a prohibited list)
(b) regulation 6 (refusal of employment agency services relating to a prohibited list)
(c) regulation 9 (detriment relating to a prohibited list)

23. Under regulation 33 (detriment relating to additional paternity leave) of the Additional Paternity Leave Regulations 2010

24. For personal injury (except any latent personal injury)

25. For breach of contract

26. In relation to notice or pay in lieu of notice.

If you think understanding and checking that none of that lot applies is easy money then I'd hate to see your definition of difficult money!

Such work is also highly risky (hence the requirement for PI insurance). If advice is given and it turns out that that the employee would probably have received twice as much if they'd gone to a tribunal that £250 income could very quickly turn into a £25,000 loss.

Doing the job properly can take several hours, and as £250 is the hourly rate for a middle ranking associate solicitor these days very few firms can make a profit if they do the job properly.

Sadly, as with many other areas of what used to be a legal profession, there are plenty of cowboy firms around who will actively tout for business from employers who are making redundancies and offer to do such work at a low price, hoping they will be referred dozens of employees.

They neither know nor care about whether the deal's good or not. They just get the client to sign up and collect the cheque, acting on the assumption that 99% of employees would never dream of investigating the merits of the deal for themselves. And with the virtual disappearance of unions in most workplaces the chances of the employee ever finding out they've been screwed are infinitesimal.

This practice has driven the fees offered down, so that if I try to negotiate a sensible fee the employer will just say that other employees have gone to Claims-U-Like solicitors who have happily accepted £100, so I can take it or leave it. And if I tell the client they're going to have to pay me additional fees out of their settlement they are out of the door heading for Claims-U-Like before I've finished the sentence.

Although I've often done this type of work for an established client, it's done at a significant loss simply because that's part of a long term client relationship, and on a swings and roundabouts basis I'd hope that I'd make it back on more remunerative work. But if a new client came in off the street I'd probably turn it down. There are far easier and more enjoyable ways of earning £250.

[pochisoldi]

In my one and only experience of signing such an agreement, the employer paid the bill to a solicitor of my choosing directly, probably the easiest £250 the solicitor ever made.

Hollow mirthless laugh! On the contrary, it's nowhere near enough in many cases.

I agree with you, but in my case, back in 2001 it was plenty...

After looking at the settlement, the discussion with the solicitor was somewhere along the lines of:

Solicitor: "Do you think you were fairly selected?"
Me: "No, but when they are offering you that kind of money for less than two years service, I'll take the money"
Some forms were signed, and that was that.

Agreement was 2 months pay for each year/part year of service, plus 3 months on paid gardening leave.
It was clear that jobs had to go, and there was nothing to stop the company dispensing with my services without paying any redundancy.
I was selected on the basis that one of two people had to go, and I had the higher salary. It was all about $$$ so my experience/qualifications/capability wasn't really looked at.
There was no other "unfinished business" as far as the contract of employment was concerned.
It was clear that if I had stayed I would have had to have worked harder with little prospect of the bonuses/pay rises I'd had previously, and sometimes you just know that "all things come to an end".

PochiSoldi

[GJHarney]

I do the legal advice on SA's on a regular basis (prob a couple of thousand over the years) as a TU Official. Obviously it is a free service that all unions provide to their members, and we didn't use to charge employers but then figured that if they are willing to pay a solicitor to do it (between £250 - £350 plus Vat is standard) then why should we not be getting paid as independent advisers under the regs ('we' as in the union, I don't get a penny of it sadly), so we also get the dosh from employers too, but it is pretty easy (essentially explaining the legalese, implications and giving some basic tax/pension/benefits pointers as appropriate). Legal advice is required under the law for SA's, on the face of it to protect the employee, but the liability insurance (or Law Society for solicitors) also protects employers if we give duff advice that leads to expensive compensation issues down the line.

In relation to the OP's friend and redundancy, then while for any redundancy that is compulsory and paid at statutory rates it really isn't needed, for a VR and enhanced payment then most employers will want to do this via an SA as it provides extra protection for them in terms of the dismissal, but also ensures that the first £30k of any payment can be tax free. There can also be the added advantage of the possibility of an agreed reference if the employee wishes to have one with an SA.

[PetraM]

I just thought I'd update anyone interested on what happened to my friend.

The employer didn't pay all the legal costs; they had a ceiling on the payment that would have been fine in normal circumstances but my friend's situation required the solicitor to do a little more work than usual and my friend ended up having to pay about £150 towards the overall costs.

Things worked out well though. Though my friend would prefer to still be in work, the settlement was generous; way above legal requirements, and so they've been enjoying the summer and trying to make up their mind about if they actually want to find a job at all or if it's possible to eek out the payment to get them to being able to take their pension early.

(Having been made redundant more than once myself, I do just feel little )