Can a settlement agreement settle future unknown employment claims? This question was recently considered by the Employment Appeal Tribunal in the case of Bathgate v Technip UK Ltd. It was decided that a settlement agreement could not settle future claims unknown to the parties at the time of entering into the agreement. We consider the practical consequences of this case for employers.
Settlement agreement
In order to waive or settle a statutory employment claim, for example, for unfair dismissal or discrimination, an employer and employee must either enter into a settlement agreement or agree this via an Acas conciliator. For a settlement agreement to be valid it must meet various statutory conditions, which includes that it must relate a “particular complaint” or “particular proceedings”.
It is an interesting point as employers will want a settlement agreement to achieve full and final settlement of any and all employment claims. There has been previous case law indicating that such wide-ranging, blanket waivers are insufficient to achieve this.
The facts of the Bathgate v Technip UK Ltd case
The Claimant (Mr Bathgate) had his employment ended by reason of redundancy in January 2017. He accepted voluntary redundancy and entered into a settlement agreement on which he was advised by a solicitor, signing it on 29 January 2017. In return for an enhanced redundancy payment package Mr Bathgate agreed to settle all claims against his employer. There was a specific waiver of a list of claims, including age discrimination under section 20 of the Equality Act 2010. In addition there was a general waiver of claims which included future claims.
The settlement agreement referred to a further additional payment that was due to be paid in June 2017 (Additional Payment). This payment was stated to only apply to employees who were under the age of 61. Although Mr Bathgate was 61 years old at that time, he was under the belief that he would receive the Additional Payment. After the settlement agreement had been entered into, his employer decided not to make the Additional Payment to employees, including Mr Bathgate, who were 61 years or above at the time of their dismissal. This information was not communicated to him until June 2017. The discriminatory act took place after employment had ended and after the settlement agreement had been signed.
Mr Bathgate brought a claim of age discrimination in the employment tribunal. He was initially unsuccessful with the tribunal concluding that he had lawfully settled his claim under the settlement agreement.
Employment Appeal Tribunal Decision
He then successfully appealed to the Employment Appeal Tribunal to the extent that the EAT concluded section 147 of the Equality Act 2010 did not allow the settlement of claims before they had arisen and the statutory words, the “particular complaint” limited settlement to those claims known to the parties. In this case Mr Bathgate’s claim “depended on discussions whose outcome was unknown, the parties could not settle any future complaint of age discrimination”.
The EAT stated that the statutory requirement for a valid settlement agreement to relate to “the particular complaint” requires an actual complaint to exist or at least circumstances where the grounds for a complaint exist. The EAT also gave its view that the practice of trying to waive each and every possible type of employment claim (relevant or not) in a settlement agreement is not good practice with the implication being it may not be effective.
Practical implications for employers
The case of Bathgate v Technip UK Ltd is a useful reminder that employees can bring claims for discrimination and harassment against employers that occur post-termination of employment. If there is a risk of a contentious employment decision then it would be advisable for this to take place prior to the parties entering into a settlement agreement, which may entail forward planning by employers in relevant circumstances. Furthermore, where there is a gap between the parties agreeing to settlement agreement terms and the date of termination of employment, it is advisable for a second settlement agreement to be entered into upon the termination date and before payments are made to the employee.
There has been debate for some time as to whether or not a settlement agreement could be used to waive future, potential statutory claims and this case casts further doubt on this. Although, it may be possible to waive existing and yet unknown contractual claims, subject to using wording that it sufficiently clear to confirm this is the genuine intention.
This decision is not a helpful one for employers who are seeking a completely clean break from an employee upon termination of employment. It confirms that settlement agreements should clearly set out the specific complaints and claims that are being settled. It also confirms the merit of including a warranty that an employee is unaware of and has no intention of bringing any future claims. Despite the EAT’s criticism of an employer including a long list of claims to be waived whether relevant or not in a settlement agreement, it is not anticipated that this practice will change any time soon. There will be circumstances where claims have not been discussed between the parties, but nevertheless there will be a real possibility of these being relevant for settlement.
Employers may want to give consideration to using a COT3 agreement in appropriate circumstances to waive claims, as there is a wider ambit to do so, as they are not subject to the same constraints about particular proceedings or complaints and can be used for the full and final settlement of all claims over which Acas is able to conciliate. It is not possible for Acas to be involved in settling all disputes, but where they are involved it is worth bearing this point in mind.
Getting advice
The Employment team at Stephens Scown can support businesses on the challenges discussed in this article. To discuss any of the issues raised, please email enquiries@stephens-scown.co.uk or call 01392 210700.