Can a settlement agreement waive unknown future claims?
An Employment Tribunal recently considered this query and determined that yes, settlement agreements could waive unknown future claims. However this decision was later overturned by the Employment Appeals Tribunal.
The Claimant in the case of Bathgate v Techtip UK Ltd and others [2022] EAT 155 was a 61 year old male who had been employed as a Chief Officer at the Respondent for approximately 20 years. His employment was terminated by the Respondent by reason of voluntary redundancy under a settlement agreement. Under the terms of the settlement agreement, the Claimant received an enhanced redundancy payment, a sum in respect of his notice period and an additional payment calculated by reference to a collective agreement which was stated to be payable in June 2017. At the time of signing in January 2017 the Claimant was under the impression that he would receive the additional payment in June 2017, however in March 2017 the Respondent determined that the additional payment would not be paid to any employee who had both been made redundant and who was over the age of 61.
The Claimant brought a claim in the Employment Tribunal for direct and/or indirect age discrimination. The Respondent accepted that the reason the payment was not made to the Claimant was because of his age, however it was asserted that by signing the settlement agreement the Claimant had waived any right to bring any such claims.
In order for a settlement agreement to validly waive employment law claims, it must meet the relevant statutory conditions. Such conditions include, under section 147 of the Equality Act 2010, that the employee must have received independent legal advice on the terms and effect of the agreement, that the agreement must be in writing and that the agreement relates to a ‘particular complaint’. The Claimant argued that as the grounds for the claims had not yet arisen at the time he signed the settlement agreement, they could not amount to ‘particular complaints’ for the purposes of an effective waiver of claims under the agreement. On appeal, the EAT agreed with the Claimant and ruled that section 147 of the Equality Act 2010 prevented the settlement of claims before their existence was known. If the Claimant had known of the possible claim at the time of signing the agreement and had taken legal advice on the terms of the agreement then he would have been seen to have validly waived the claims.
Employers should therefore be wary that any potentially discriminatory acts which occur after an employee has signed a settlement agreement could create grounds for a successful claim against the employer by the employee.
The employment team at Rollits advises both employers and employees on the use of, and terms and effect of, settlement agreements. If you require such advice, please get in touch and a member of our team would be happy to assist.
