Written by Brabners LLP
In the case of Bathgate v Technip UK Ltd (2022), the Employment Appeal Tribunal (EAT) has held that unknown future claims cannot be compromised by a settlement agreement.
Mr Bathgate accepted voluntary redundancy in January 2017. He entered into a settlement agreement with his employer, which provided that he would receive various payments and benefits, including an ‘additional payment’ for redundancy. The additional payment was not due to be paid until June 2017.
There was a collective agreement applicable to Mr Bathgate’s employment. One of the terms of the collective agreement was that only employees under the age of 61 were entitled to receive the ‘additional payment’. Mr Bathgate, who was 61 years old at the time of taking voluntary redundancy, believed that he would be entitled to the additional payment.
In March 2017, Mr Bathgate’s employer decided not to pay the additional payment to any employees who were 61 or over at the time of termination of their employment. Mr Bathgate was not made aware of this until June 2017.
The settlement agreement which Mr Bathgate had signed earlier in the year set out a list of specific claims, including age discrimination, which Mr Bathgate would be deemed to have waived by signing the agreement. The settlement agreement also included a general waiver of any future claims which may arise after the date of the settlement agreement.
Mr Bathgate brought a claim of age discrimination in the Employment Tribunal but was unsuccessful. He appealed to the Employment Appeal Tribunal, claiming that the settlement agreement which he had signed could not validly waive claims which had not yet arisen or which he was unaware of at the time of signing.
The EAT decision
The EAT found that Mr Bathgate had not waived his age discrimination claim by signing the settlement agreement, as a settlement agreement cannot settle unknown future claims (and at the time of signing, it hadn’t been communicated to Mr Bathgate that he would not receive the additional payment because of his age). Section 147 of the Equality Act 2010 lays down certain conditions that must be met in order for a settlement agreement to constitute a valid waiver of employment claims, including the fact that it must be in writing and the employee must have received independent legal advice on its terms. Under Section 147(1)(b) of the Act, it is also essential that the waiver of claims relates to a “particular complaint”. Mr Bathgate argued that the settlement agreement could not apply to this claim as the complaint was unknown when he signed.
The EAT decided that the words “the particular complaint” meant that there had to be an actual complaint or circumstances where the grounds for a complaint already existed. The EAT did not accept that this included a potential future complaint that had not yet arisen.
The EAT concluded that a claimant must already be aware that they have a claim, or the circumstances which might give rise to a claim, prior to the settlement agreement being entered into, in order to waive their right to bring such a claim in the Employment Tribunal. Here, Mr Bathgate had signed away his right to bring an age discrimination claim before he knew whether he had one, and in the EAT’s view, that meant that the settlement agreement did not prevent him from pursuing that claim after it arose.
Prior to this decision, it was generally understood that it was possible to settle unknown future claims as part of a settlement agreement as long as the wording of the agreement was sufficiently clear. Given that this case is very recent and is different from the previously understood position, it is unlikely that significant changes will be made to the way settlement agreements are drafted in the short term. However, this decision does create uncertainty and, from the perspective of employers, puts a question mark over whether settlement agreements can bring the finality and “clean break” desired.
Umbrella companies and other employers need to be aware of the potential limitations on settling future claims when considering entering into a settlement agreement with an employee. Where there is any concern about a possible future complaint, the drafting will have to be very clear, and employers should consider specifically referring to those potential claims (or the circumstances which might give rise to a claim) within the settlement agreement in order to have the best chance of arguing that the employee has waived their right to bring any such claim in the future.
This bulletin is for general guidance purposes only and should not be used for any other purpose.
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