Robust training, preferably with input from employment lawyers, will be critical if CIPD-qualified HR consultants gain new legal power to sign off settlement agreements, HR experts have said.
However, the amendment prompted concerns that it could lead to increased risks and costs for HR professionals.
Claims exposure
“Settlement agreements are often complex and providing incorrect advice to employees can expose any adviser to significant claims,” Matt Jenkin, employment partner at law firm Herrington Carmichael, told Benefits Expert.
HR advisers would also have to avoid conflict scenarios such as acting for employees when they are also providing HR advice to the employer, he said.
“Also, often settlement agreements are not simply signed as presented to an employee and require detailed negotiation. HR advisers would need to be prepared to act for individuals where perhaps their practice is more focused to advising organisations.”
Legal connotations
HR consultant, M&A advisor, and qualified magistrate, Katherine Watkins said she would be interested in taking up the new powers if the bill amendment passes.
But she said it would require careful thought as settlement agreements can make their way into public, even if the agreement has privacy clauses.
“No chief people officer (CPO) or HR director (HRD) wants their name in the press or the media or leaked.
“Plus, a lot of businesses, the execs and the senior management, still don’t really understand enough about settlement agreements. They see it as a quick way to get rid of someone, just sign it and they go away. But actually, there are a lot of legal connotations attached to it and I think the average HRD or CPO isn’t fully abreast of the implications of them.”
Risks for the ‘unaware’
Jenkin said if more HR professionals were to take up this potential opportunity he would expect to see a rise in employees claiming they had been given inadequate advice.
“As someone who regularly advises on settlement agreements, they are often detailed covering a multiple of issues that touch on employment rights, benefits, share options, post-termination restrictions, taxation issues etc,” he said.
“As such, the risk of claims for the unaware is significant. I don’t think [claims of] biased advice should be an issue so long as there is no conflict in providing the advice in the first place. HR advisers, like qualified lawyers, will have to avoid providing advice on settlement agreements for employees on matters that they have been involved in advising the employer over. You can’t play both sides of the fence!”
More learning required
Watkins added: “For a lot of people, I think there’s still a lot of learning that needs to be done. Settlement agreements are not a quick way to exit someone. They are a legally binding agreement. Care should go into the creation of them, and certainly with the bill [amendment], if it can be passed, I would want people to do some refresher training, even for experienced CPOs”.
The CIPD, which worked on the amendment with Lord Pitkeathley, said if the amendment is approved, the professional body will develop “an extra level of specialist training for consultants interested in taking on this specialist role”.
Ben Willmott, head of public policy at the CIPD, said: “Approved consultants would be required to undergo ongoing training and development to ensure they have the necessary skills and knowledge to effectively advise employees on settlement agreements.”
The potential risks and liabilities associated with offering independent legal advice on settlement agreements would also be covered by the training developed by the CIPD.
In response, Watkins said she would want to know who has been instrumental in the training for the CIPD. “Is it your employment lawyers? [Any training needs] to make sure it really has that gusto and strength around it. If they can nail that bit, I think they’ll have a lot of people sitting up and saying, ‘yes, as an HR professional ‘Can I have some training on it?’.”
Jenkin agreed that any certification process would need to be rigorous.
“I still think the default will be to instruct a solicitor on a settlement agreement,” he added.
“A qualified lawyer is already one of three types of qualified advisers (the others being certified trade union officials or advisers from recognised advice centres). However, it is still rare to see such an adviser being involved in advising on settlement agreements. That would indicate to me that there isn’t a pressing need to change the system and that obtaining advice from a qualified lawyer is still the preferred route.”
Logical extension
CIPD’s Willmott said: “Trade union and advice centre reps can already sign off these agreements. CIPD verified HR consultants with experience of dealing with employment law daily – especially with accredited training – will be just as competent.
“As some of our members have highlighted, many HR professionals regularly draft settlement agreements and negotiate terms with solicitors or union representatives. Signing off is a logical extension. More complex cases would still need to be referred to solicitors.
“We don’t yet know the demand for this work across the 15,000 self-employed HR consultants who are CIPD members, but from focus group discussions we do know there is a lot of interest and support for this change.”
When the amendment was published, concerns were also raised that with additional powers would come higher insurance costs, which could deter some people.
Watkins said increasing your insurance to cover new legal responsibilities was “less and less” of an issue for HR consultants.
She explained: “I don’t see that there’s enough case law around people of a private practitioner route who have been sued and had to rely on their insurance.
“Even as a company, I haven’t seen much case all around it, but Matt [Jenkin] and Steve [Herbert] are quite right to raise it, because whether you’re a sole trader or an independent consultant, we, on average, will have £1 million to £2 million of professional indemnity insurance cover. You’ve got to factor in actually what percentage of that [would cover settlement agreement advice].”
If an advisor was taken to court for poor advice, she said a case could be in court for one to two years and lead to potential reputational damage.
“It comes back to that knowledge and training,” she said as she urged interested HR professionals to think about this potential opportunity very carefully.
