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Tags: Bathgate v Technip, case update, Settlement agreements
Categories: Employment Law
Summary: Can unknown future statutory claims be validly settled via a settlement agreement?
No, says the EAT in Bathgate v Technip (available here).
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. The EAT has clarified the correct position.
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.
Tribunal decision
The Tribunal agreed with Technip and said that future age discrimination claims were covered by the agreement’s waiver of ‘all claims…of whatever nature (whether past, present or future..)’ which arose out of or in connection with the employee’s employment – 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’.
Implications: The EAT’s decision means it is only possible to waive statutory employment claims where an actual complaint exists (or known circumstances that may give rise to one). This is unsettling for employers as it is therefore uncertain that entering into a settlement agreement with an employee will bring an end to the potential for claims. If further issues arise or unknown matters come to light after the agreement is signed, the employee will remain free to bring statutory claims arising out of these circumstances.
In most cases the risk of future unknown claims arising will be low (and we will ensure the agreement mitigates the risk as far as possible) but, nevertheless, employers should factor in the risk of these when (deciding to) enter into a settlement agreement.
The other option is to involve ACAS in negotiating the settlement of claims and to finalise this using a COT3 agreement, where broader waivers remain effective.
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