KNOWLEDGE

Settlement agreement cannot waive unknown future discrimination claims

Morton Fraser Senior Associate Sarah Gilzean
Author
Sarah Gilzean
Senior Associate
PUBLISHED:
27 October 2022
Audience:
Business
category:
Blog

There has been significant debate over the years as to whether it is possible for settlement agreements to effectively waive future claims that have not yet arisen. 

In the past, the Employment Appeal Tribunal (EAT) has held that whilst parties may agree that a compromise (now settlement) agreement is to cover future claims of which the employee does not and could not have had knowledge, to do so effectively, the terms of their agreement must be absolutely plain and unequivocal. 

However, the EAT in Bathgate v Technip UK Ltd and Others has held that settlement agreements do not allow for the settlement of future discrimination claims unknown to the employee at the time the settlement agreement was signed.  The claimant, who was over 61, signed an agreement as part of a voluntary redundancy package.  The settlement agreement provided for enhanced redundancy and notice payments, and an additional payment calculated by reference to a collective agreement.  However, it was then decided that the terms of the collective agreement did not require the additional payment to be made to those over 61 years of age.  When that was communicated to the claimant he sought to bring an age discrimination claim.  One of the grounds of resistance presented by the respondent was that the claim had been validly compromised by the settlement agreement.

The employment tribunal found for the respondent, the settlement agreement including a waiver of "all claims…of whatever nature (whether past, present or future..)". However, the EAT allowed the claimant's appeal on this point. The claimant had signed away a long list of claims, including age discrimination claims, but the EAT did not accept that this identified the particular claim as required by section 147 of the Equality Act 2010.  Section 147 allows employment claims to be compromised by way of a settlement agreement that "relates to a particular complaint". Lord Summers (who heard the claim in the EAT) was of the view that the use of those words demonstrated that when passing the legislation Parliament anticipated the existence of an actual complaint or circumstances where the grounds for complaint existed.

However, unfortunately for the claimant the appeal also concerned a jurisdictional point in which he was unsuccessful, and for this reason the EAT ruled the claim could not succeed.

Organisations using settlement agreements need to be aware of the limits of the compromise that can be obtained in light of this case.  It is also essential to ensure the settlement agreement used has been drafted with the circumstances of the particular case in mind.

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