Settlement Agreement & Future Claims

Is it possible to waive unknown future claims with a Settlement Agreement?

In Bathgate v Technip UK Ltd [2022] EAT 155, the Scottish Employment Appeal Tribunal (EAT) held that section 147 of the Equality Act 2010 does not allow a qualifying settlement agreement to settle future claims that are unknown to the parties at the time of entering into the agreement. In other words, a settlement agreement cannot waive future claims that have not happened yet.

In the aforementioned case, Mr. Bathgate accepted voluntary redundancy and signed a settlement agreement which provided for an enhanced redundancy payout and notice payment. In addition to these payments, the agreement referred to a potential “Additional Payment” to be paid at a later stage. The Additional Payment was to be calculated by reference to a collective agreement. However, 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 Mr. Bathgate being 61 at the time of signing the agreement, he was under the impression that he was due to receive the Additional Payment. When his employer decided not to pay the Additional Payment to employees who were 61 or over at the time of their dismissal, Mr. Bathgate brought a claim of age discrimination.

The settlement agreement between the parties provided that the terms were in full and final settlement, and this included waiving claims for direct and indirect age discrimination under the Equality Act 2010. The employer therefore submitted that Mr. Bathgate had compromised his right to pursue a claim and argued that Mr. Bathgate’s age discrimination claim has already been validly settled under the terms of the settlement agreement. The Employment Tribunal sided with the employer and rejected Mr. Bathgate’s claims.

Mr. Bathgate appealed the tribunal’s decision and argued that as he did not know of the age discrimination claim at the date of signing the agreement, he was unable to waive the right to bring a future claim to the tribunal. The appeal was allowed.

The employer’s reliance on the fact that age discrimination complaints had been included in the long list of claims being waived by way of the Settlement Agreement was not allowed. In other words, it did not mean that this particular age discrimination complaint had been identified in the settlement agreement. The EAT reiterated the provisions of s. 203 of the Employment Rights Act, specifically that settlement agreements should only be able to settle a particular complaint (s.147 of the Act) that has already arisen between the parties. Mr. Bathgate could not be expected to sign away his right to claim age discrimination before he knew whether he had a claim or not.

Although such a strict interpretation may be inconvenient where both parties wish to avoid future claims, the Parliament did not consider this desirable, and it had legislated to prevent it. 

 Implications and practical considerations

Although the decision in Bathgate v Technip UK Ltd and others was handed down by the Scottish EAT, the case creates a binding precedent for Tribunals in England and Wales. In light of this recent development, employers should be cautious that settlement agreements may not always achieve the desired ‘clean break’ outcome. To mitigate potential litigation risks concerning settlement agreements, employers should explicitly set out the circumstances that have led to the settlement agreement and capture any specific complaints in as much detail as possible. In any event, the employer is still left with the risk of an employee bringing a claim that exists outside the scope of a settlement agreement. Therefore, in practice, it is very unlikely for there to be a significant change in the way settlement agreements are drafted.

 Nonetheless, an employer may still wish to follow practical steps to avoid future litigations concerning settlement agreements. These include seeking a warranty from the employee to confirm that there are no additional claims that the employee is aware of and has no intention of bringing any additional claims in the future. It may also be prudent to resolve any contentious points between the parties prior to entering the settlement agreement so as to avoid the possibility of any future dispute. This includes specifying details of payments and any conditions attached to it to avoid any confusion at a later stage. In addition, if there is a gap between the employee signing the settlement agreement and the employee’s termination date, it is recommended that the employee signs a reaffirmation letter on or shortly after the termination date to re-confirm that they waive the claims specified under the agreement.

For further advice and assistance please contact our Employment Law team on 01604 828282 / 01908 660966 or email info@franklins-sols.co.uk