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According to a recent Employment Appeal Tribunal decision, an employee cannot settle future statutory claims that have not arisen at the date of the settlement agreement. We review what this means in practice for parties entering into such agreements.

In order for a settlement agreement to be valid, it must comply with the necessary statutory requirements. In particular, the employee must have received independent legal advice on the terms and effect of the agreement and the agreement must refer to the ‘particular complaints’ or ‘particular proceedings’ that it is intended to waive. A blanket waiver of claims is not sufficient and, in order to be settled, claims must be clearly identified within the written agreement. The intention behind this is so that employees do not sign away their rights without having a full understanding of the potential implications of this.

There has previously been much uncertainty regarding whether it is possible for employees to sign away future claims that are not contemplated by the parties at the time of entering into the settlement agreement. Prior caselaw had indicated that it was in fact possible to settle future claims if the terms of the agreement were ‘plain and unequivocal’. However, the recent case of Bathgate v Technip UK Ltd and others deviates from this principle and seems to confirm that future statutory claims, which are unknown to the parties at the time of signing, cannot be settled. 

Bathgate v Technip UK Ltd and others

In this case, Mr Bathgate’s employment with his employer terminated by reason of redundancy. Upon termination, the parties entered into a settlement agreement which referred to, among other payments, the possibility of an “Additional Payment” being paid to Mr Bathgate. This payment was to be calculated in line with the terms of a collective agreement in place between the National Maritime Agency and a trade union. The collective agreement predated age discrimination legislation and its terms stated that the payment would only be made to employees who had not yet reached the age of 61. 

Despite being 61 at the time of his dismissal, Mr Bathgate had expected to receive the Additional Payment. However, over a month after the date of the settlement agreement, Mr Bathgate’s employer decided that, due to his age, they were not required to pay him the Additional Payment contemplated by the terms of the settlement agreement. Mr Bathgate argued that this constituted age discrimination and, on this basis, he subsequently brought a claim to the Employment Tribunal (ET). 

The settlement agreement between the two parties provided that the terms were in full and final settlement of Mr Bathgate’s particular complaints against his employer, and this included waiving claims for direct and indirect age discrimination under the Equality Act 2010. The wording of the agreement also contained a general waiver of all claims that Mr Bathgate had or may have arising out of, or which were in any way connected with, his employment or its termination – regardless of whether they were past, present or future claims. As such, his employer argued that his age discrimination claim had already been validly settled under the terms of the settlement agreement and therefore his claim should fail. The ET agreed with this approach.

Mr Bathgate appealed the ET’s decision, arguing that reference to a ‘particular complaint’ is required in order for a claim to be validly settled. He contended that, as he did not know of the age discrimination complaint at the date he entered into the agreement, he was unable to waive the right to bring this future claim to the ET. The Employment Appeal Tribunal (EAT) agreed with Mr Bathgate and confirmed that the general waiver of age discrimination claims did not satisfy the requirement for identifying a ‘particular complaint’. They stated that to decide any differently would be contrary to the purpose of the legislation and would allow employees to sign away their statutory rights, irrespective of whether they had a proper understanding that this is what they were doing.

Implications and practical considerations

Despite the decision in Bathgate v Technip UK Ltd and others being handed down by the Scottish EAT, this case creates a binding precedent for Tribunals in England and Wales. However, it is worth bearing in mind that while the decision commented that including a long list of statutes and waiving any claims that could arise thereunder might not be sufficient, this element of the judgment is not binding on future decisions as it did not relate to the specific facts of the case. 

In light of this development in caselaw, employers should be aware that entering into a settlement agreement may no longer achieve the ‘clean break’ with an employee that they so desire. In order to mitigate the risks attached to this, employers might be tempted to more specifically tailor an agreement to outline the factual circumstances and the specified claims to be settled. However, this also leaves employers open to risk if an employee brings a claim that exists outside of those explicit facts. Therefore, in reality (at least for the time being), it is unlikely that there will be significant changes in practice to the drafting of settlement agreements so as to ensure that the correct balance is struck. 

However, there are still some practical steps that employers can look to take in the meantime. For example:

• it might be appropriate to obtain a form of warranty from the employee that they are unaware of any further claims and/or they have no intention to bring any additional claims;
• any outstanding contentious points between the employer and the employee should be dealt with prior to entering into a settlement agreement so as to avoid the possibility of any future dispute; 
• details of any payments or benefits to be received under the settlement agreement, including any conditions attached to them, should be clearly set out in the settlement agreement to avoid confusion later on; and
• if there is a lapse in time between the signing of a settlement agreement and the employee’s termination date then it is best practice to require the employee to sign a reaffirmation letter on or shortly after termination to reconfirm that they waive the claims specified under the agreement. 

It is also worth noting that ACAS-conciliated settlements in the form of a COT3 agreement are not subject to the same requirement to identify ‘particular complaints’. Whilst it will not always be possible to involve ACAS in settlement negotiations, in some cases, a COT3 could act as a useful workaround to the principles outlined by Bathgate v Technip UK Ltd and others.

 

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