In Bathgate v Technip UK Limited and others, the Employment Appeal Tribunal in Scotland has held that unknown future claims cannot be settled by a settlement agreement.
What is a Settlement Agreement?
Settlement agreements are legally binding contracts between an employer and an employee where the employee agrees not to pursue certain claims in return for compensation. These agreements are commonly used when employment contracts are terminated, especially in cases of redundancy. They aim to provide employers with protection against any future litigation.
Facts of The Case
The claimant, Mr Bathgate, was made redundant from his chief officer position after almost twenty years of employment. He was offered redundancy terms under a settlement agreement which he accepted and signed in January 2017. The settlement agreement included an inflated notice and redundancy payment, that was to be paid alongside his final salary. Then, an additional fee would be received in June. He was sixty-one at the time of signing.
In March 2017, the company decided that the additional sum would not be paid to those sixty-one and over. However, Mr Bathgate was not told this information until June of that year. He brought a tribunal claim on the basis that this amounted to age discrimination.
His employer accepted that age was the reason he was not paid the sum but it argued that by signing the settlement agreement, Mr Bathgate had waived his right to pursue any further claim. The tribunal agreed that the age discrimination claims were precluded by the terms of the settlement agreement, which included a general waiver of all claims, regardless of what their nature was or whether they were from the past, present or future and linked to Mr Bathgate’s employment.
The EAT’s Decision
The EAT, however, allowed the appeal, finding that the age discrimination claim had not been settled because the settlement agreement did ‘not relate to the particular complaint,’ as required by S.147(1)(b) of the Equality Act 2010 (EA).
It confirmed that a particular complaint must be identified in the settlement agreement, either by a generic description or by reference to a statutory provision, to validly waive that claim. Although direct or indirect age discrimination claims had been referenced in a long list of claims to be waived in the settlement agreement, this did not mean that a claim of age discrimination had been identified.
In this case, Mr Bathgate had signed away his right to bring an age discrimination claim under the terms of the settlement agreement without knowing that he had a claim to bring. This, according to the EAT, was not permitted under the EA. It went on to say that it would be contrary to the purpose of protecting employees from signing away their statutory rights if they could validly waive claims before knowing whether or not they had a claim.
What Does This Mean for Employers?
In contrast to previous cases, this decision suggests that a settlement agreement can only protect an employer from claims that have been made or raised by the employee at the date of the agreement.
To reduce the risk of claims arising after the settlement agreement is signed and potentially not being protected under the agreement, it is advisable to execute the settlement agreement as near as possible to the termination date. Alternatively, parties may be able to use a COT3 Agreement negotiated through ACAS to settle an employment dispute, which is not subject to the same restrictions about particular complaints or proceedings.
Get in touch with a member of our employment team for more information on settlement agreements.
