Settlement Agreements. When the floodgates open

Settlement Agreements are used in a wide range of situations and scenarios from individuals to large scale workforce redundancies. Recent press coverage of claims against Birmingham City Council demonstrates how settlement agreements can be used when an employer is facing claims from a large majority of its workforce.

In 2012, a group of former employees brought claims against their employer, Birmingham City Council under the equal pay legislation claiming that they were paid less than men for work that was of equal value. Following a successful legal battle over whether the claims could be brought out of time, the Court held that the council had breached the equal pay laws and ordered the council to pay.

The knock-on from this case has been that the floodgates have opened and thousands of former employees have brought similar claims against the council. To date, it is estimated that over £500 million has been paid to claimants and this is expected to double. The leader of the council has warned that public services such as rubbish collection and care of vulnerable people may be capped if a solution is not found. The council have sold off a number of assets such as surplus office space and land however more drastic action may be required – one rumour has been the sale of one of its most valuable assets, the National Exhibition Centre.

Whatever the solution, the tide of claims will not recede anytime soon. In order to mitigate further legal costs of defending these claims, it is anticipated that some form of settlement agreements will be used in many cases.

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