A settlement agreement is an arrangement in which a current or former employee or worker agrees to waive or settle a claim or multiple claims against the employer, normally in return for a payment.

Certain statutory employment rights such as protection against discrimination claims, unfair dismissal or protection against unlawful deductions from wages can only be waived or settled by way of ACAS conciliation or a settlement agreement that meets certain statutory conditions.

These conditions can be found under 147 of the Equality Act 2010 (EA 2010) which conveys what it means to have a qualifying settlement agreement. One of the first conditions of a qualifying settlement agreement is that it must relate to the ‘particular complaint’ that the complainant has. Therefore. when settling a matter of a ‘particular complaint’, it does not in the first instance, seem to cover any potential future complaint.

There has been much debate whether it is possible to waive unknown future statutory employment claims by way of a settlement agreement. In the case of Lunt v Merseyside TEC Ltd [1998], the Employment Appeal Tribunal found that a blanket agreement to waive all future statutory employment claims is not permitted. However, a passage from Royal National Orthopaedic Hospital Trust v Howard [2002] states ‘if the parties seek to … release claims of which they have and can have no knowledge whether those claims have already come into existence or not, they must do so in language which is absolutely clear and leaves no room for doubt as to what it is they are contracting for’. This shows that future and unknown claims could be waived in agreements as long as the wording of the waiver makes it absolutely clear that this was the intention.

Bathgate v Technip Singapore PTE Ltd [2023]

Facts:

Mr Bathgate worked as a Chief Officer on several ships outside of the UK. During his last six months of employment, Mr Bathgate worked onshore in Scotland where he took voluntary redundancy by way of a settlement agreement.

Under the settlement agreement, Mr Bathgate’s employer agreed to pay notice pay, enhanced redundancy pay and a future ‘additional payment’ which was to be calculated in accordance with the terms of a collective agreement. The additional payment was only to be made to those officers who were under the age of 61. Mr Bathgate was unaware of the discriminatory provisions at the time of signing the settlement agreement and he was 61 years of age when he signed the agreement.

A few months after the termination of his employment, Mr Bathgate was informed he would not be receiving the additional payment. He subsequently made a claim stating that refusal to pay him amounted to post-employment age discrimination. His employer defended the claim on the basis that Mr Bathgate had signed a settlement agreement which included a clause to waive his rights to pursue any future claims against them, including discrimination.

The signed settlement agreement stated that it constituted full and final settlement of all claims and listed various types of claims, including age discrimination. There was also a general waiver of ‘all claims … of whatever nature (whether past, present or future)’ noted within the agreement. The tribunal held that Mr Bathgate’s claim was therefore precluded by him signing the agreement. He subsequently appealed.

EAT:

The Employment Appeal Tribunal (EAT) disagreed and referred back to section 147 of the EA 2010 where settlement agreements must only relate to a ‘particular complaint’ and section 203(3) of the employment Rights Act 1996 which states that an agreement is void where it precludes a person from bringing any proceedings under the 1996 Act.

The EAT decided that to fulfil a ‘particular complaint’, the parties must anticipate the existence of an actual claim or know of circumstances where a claim or complaint already exists. It therefore concluded that the agreement was unenforceable, and Mr Bathgate could pursue his claim. The point was appealed to the Court of Session.

Court of Session:

The Court of Sessions investigated the requirement that a settlement agreement must relate to a ‘particular complaint’ against previous case law. The court also reviewed the Explanatory Notes to the EA 2010 in terms of qualifying settlement agreements in which it states that the contract must be tailored to the circumstances of the claim, not that it must settle an existing claim. The explanatory note also used an example of a future claim.

In the end, the Court held that an unknown future claim of which an employee does not and could not have knowledge, may be covered by a waiver as long as it is plain and unequivocal that this was intended. The Court further noted that "it was clear that the agreement was intended to cover claims of which the parties were unaware, and which had not accrued" and in the instance of Mr Bathgate’s agreement, ‘the types of claim are clearly identified” and “the objective meaning of the words used is such as to encompass settlement of the relevant claim’. The age discrimination claim could therefore not be pursued as Mr Bathgate had compromised his right to pursue any further claims with his employer.

Conclusion:

The Court of Session is known as the Supreme Court of Scotland. A decision in an appeal from the Court of Session is binding only in Scotland but it can be of persuasive value in the English courts.

From this decision, employers can know there is a scope for protection of unknown future claims just as long as the waiver in the settlement agreement clearly particularises which claims will be effectively waived. Employers will need to consider what potential claims could arise and ensure the possibility is strictly protected against by specific wording. This protection will not be eligible where there is use of general waivers for all claims.

Finally, employers are to be aware that this judgement will not apply when looking at waiving unknown future claims where there is no termination of employment. It would go against public policy to allow an employee to waive unknown future claims during employment where that employment was to continue and the employee’s rights abused. For example, where an employee settles a sexual harassment claim and is then bound by a waiver stating that any sexual harassment claims that may arise in future of the employment and possibly by the same perpetrator are also settled. This would leave most employees in vulnerable positions in which there is no remedy. So as well as a termination of employment, clear and precise wording must be used in settlement agreements going forward if there is to be a chance of protection from unknown future claims. This is however, not guaranteed.