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Background: Settlement agreements are generally used to bring an end to:
They require employees to waive their legal claims against the employer, usually in return for a payment of compensation. To ensure that such waivers are valid in respect of ‘statutory’ claims (i.e. those set out in legislation), the settlement agreement must comply with certain rules. These are designed to ensure employees do not sign away their legal rights without understanding the consequences.
One such rule is that agreement must relate to the ‘particular’ complaint or proceedings that are being settled. If these provisions are not met, the waiver will not be legally binding – meaning the employee could bring statutory tribunal claims, regardless of entering the agreement.
Given the risk that statutory complaints or proceedings not referred to in the agreement will not be validly waived, agreements are often widely drafted to cover all possible claims. However, there has been significant debate in Courts and Tribunals over the years as to whether this approach is effective – particularly in relation to unknown future claims.
Facts: Mr Bathgate’s employment with Technip Singapore PTE Limited (Technip) was terminated for voluntary redundancy under a settlement agreement.
His compensation included an enhanced redundancy payment and an enhanced pension payment (the ‘Additional Payment’) which was governed by a collective agreement. This agreement said that the Additional Payment would only be paid to employees under the age of 61. Although Mr Bathgate was 61 when he signed the agreement he had been under the impression he would receive it. However, just before he was due to receive the payment, the employer said they would not pay it due to his age.
Mr Bathgate brought an age discrimination claim for the failure to pay him the Additional Payment.
Technip said he could not bring an age discrimination claim because he had agreed to waive future discrimination claims in the settlement agreement which stated that it constituted full and final settlement of the claims that the employee ‘intimates and asserts’. It went onto list various types of claims, including age discrimination. The agreement also included a general waiver of ‘all claims… of whatever nature (whether past, present or future)’.
Tribunal decision: The Tribunal agreed with Technip and said that future age discrimination claims were covered by the agreement’s waiver of all claim – including those claims of which the employee was unaware. Age discrimination was included in the list of legislation to which this waiver related. Mr Bathgate appealed.
EAT decision: The EAT allowed Mr Bathgate’s appeal. It said that he had not waived his right to bring his age discrimination claim. This is because his claim was in respect of alleged discrimination which occurred after he signed the settlement agreement and he could not have known about (or had in mind) this complaint when he did so. This unknown future claim could not fall within the statutory meaning of a ‘particular complaint’, because Parliament’s intention was that settlement agreements should only settle particular complaints that have ‘already arisen’.
Court of Session decision
The Court disagreed with the EAT. It held that the employee’s age discrimination claim had been validly settled by the settlement agreement. The Court stated that ‘a future claim of which an employee does not and could not have knowledge, may be covered by a waiver where it is plain and unequivocal that this was intended’ (which it was in this case).
The requirement for a settlement agreement to relate to a ‘particular complaint’ does not mean that the complaint must have been known of, or its grounds at least in existence, at the time of the agreement.
There was no logical or principled basis upon which to conclude that a waiver would only settle future claims based on facts and circumstances in existence at the time of entering into the settlement agreement.
The Court also said it made no sense to maintain that a potential future claim could be settled by way of a COT3 agreement (to which no ‘particular complaint’ requirement applies), but not by way of settlement agreement, to which provisions regarding independent legal advice and insurance applied.
Implications: This is good news for employers and provides some certainty for employers that as long as the drafting is clear enough, future unknown claims can be settled using a settlement agreement.
Although some caution is needed (as Court of Session decisions are not technically binding in England and Wales), employers should be able to rely on this decision (unless or until it is overturned by the Supreme Court).
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