KNOWLEDGE

Can a settlement agreement settle future unidentified claims?

Morton Fraser Senior Associate Sarah Gilzean
Author
Sarah Gilzean
Partner
PUBLISHED:
12 February 2024
Audience:
Business
category:
Blog

A recent Scottish judgment has found that unidentified future claims brought under the Equality Act 2010 can be settled via a settlement agreement, but the case reveals that the devil will be in the detail of the drafting.

Settlement agreements are statutory creatures.  They are contracts, but they must meet conditions set out in a variety of statutes, depending on the nature of the claim that is to be waived.  For claims relating to discrimination, the contract must be in writing, relate to a “particular complaint”, and advice must be obtained on its terms from a suitably insured independent adviser who is identified within the body of the agreement.   While often the “particular claim” will be one which is at issue between the employer and the employee at the time of signing, the agreements commonly also seek to waive future claims that have not yet arisen.

In the recent case of  Bathgate v Technip Singapore PTE LTD, the parties went to court over whether the settlement agreement validly waived future claims.  The claimant took voluntary redundancy and signed a settlement agreement waiving his right to bring past, current and future claims, including age discrimination claims.  The language used in the agreement was that the waiver applied "irrespective of whether or not, at the date of this Agreement, the Employee is or could be aware of such claims or have such claims in his express contemplation (including such claims of which the Employee becomes aware after the date of this Agreement in whole or in part as a result of new legislation or the development of common law)."

The payment due to the claimant under the agreement was to be made in two parts.  The first was payable with the claimant's final salary, while the second was to be paid some 5 months after the date of redundancy.  The second payment was calculated by reference to a collective agreement, the terms of which restricted payments to those aged 60 or under.  At the time of termination of employment, the claimant was 61.  On being told, a matter of a few days before he was expecting to be paid it, that he was not in fact going to receive the second payment, the claimant presented an application to the employment tribunal for post-employment age discrimination. 

The respondent (Technip) successfully defended the claim in the employment tribunal on the basis it had been settled under the previously signed settlement agreement.  However, the Employment Appeal Tribunal ("EAT") overturned that decision finding future claims could not be waived unless the circumstances giving rise to the claim had arisen before the settlement agreement had been signed. 

The respondent appealed the EAT judgment to the Court of Session, who had to consider whether the settlement agreement the claimant signed "relates to the particular claim" of age discrimination that the claimant subsequently brought and that he was not aware of at the time of signing.  If it did, then the claimant could not bring his post-employment age discrimination claim.

The Court of Session held that the requirement for a settlement agreement to relate to a particular claim does not mean that it must be known of or its grounds be in existence at the time of the agreement.  All that is required is adequate specification of what the particular complaint is, and that may be achieved by reference to a generic description or to the section of a statute giving rise to the claim.  If the wording is plain and unequivocal, a future claim that the employee can have no knowledge of at the time of signing can indeed be validly compromised.

This Court of Session judgment has brought some clarity to the waiving of future claims under a settlement agreement.  It is possible in certain circumstances, but careful drafting, in plain and unequivocal terms will be required, identifying the basis of claim by a suitable generic description or statutory reference;  and specifying that the waiver covers future claims that the claimant could not be aware of or that had not arisen at the date of signing the agreement.

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