Can you predict the future? Settling unknown future statutory claims as part of a settlement agreement

An important aspect of any settlement agreement is the scope of the claims being settled. Frequently an employer’s draft agreement will attempt to settle all future claims as well as the claims that the employee has specifically asserted. These future claims will often include statutory claims that have not yet arisen at the time of agreement. In other words, they are ‘unknown’.

Whether these claims can be waived by employees has been the subject of debate, but case law has generally indicated that employees can only waive unknown future statutory claims if it is absolutely clear from the wording of the settlement agreement that it was the intention of the parties to settle those particular claims (see Hilton UK Hotels Ltd -v- McNaughton).

However, this position was recently tested by the Court of Session in Bathgate -v- Technip Singapore PTE Ltd, providing some helpful clarity on how the settlement of statutory future claims should be approached going forwards.

Factual Background

Mr Bathgate was made redundant by his former employer, Technip, and departed under a settlement agreement on 29 January 2017. In that agreement, Mr Bathgate waived his right to bring any claim for, amongst other things, direct or indirect age discrimination, which is a statutory claim. This waiver applied regardless 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”.

In addition, the settlement agreement expressly stated that it fulfilled the statutory conditions for a valid settlement agreement as set out at section 147(3) of the Equality Act 2010 (“EqA 2010”). This section sets out the statutory requirements for a valid settlement agreement including, crucially, that “the contract relates to a particular complaint”.

A further clause of the settlement agreement required Technip to make a payment to Mr Bathgate under a collective agreement. However, the collective agreement applied only to those who had not reached the age of 61; Mr Bathgate had reached that age and therefore Technip did not make that payment to Mr Bathgate. Mr Bathgate therefore brought a claim before the Employment Tribunal for age discrimination. Whether or not this statutory claim could be advanced, however, depended on whether or not it had been effectively settled under the terms of the settlement agreement.

The Employment Tribunal’s Decision

The Employment Tribunal (“ET”) considered whether section 147(3)(b) EqA 2010 had prevented the parties from settling Mr Bathgate’s age discrimination claim. Section 147(3)(b) requires a settlement agreement to relate to “the particular complaint”. In other words, it has to specify the precise claims that it is settling. Mr Bathgate argued that a settlement agreement purporting to settle post-settlement claims was not enforceable. The ET disagreed. Following the judgment in Hilton, it found that the settlement agreement did in fact expressly cover Mr Bathgate’s claim, despite the fact that it had not yet arisen at the time of the settlement agreement.

The Employment Appeals Tribunal’s Decision

Mr Bathgate appealed to the EAT, arguing that it was not possible to settle a claim under a settlement agreement before that claim had arisen. Mr Bathgate asserted that the legislation precluded the settlement of his claim, and referred to an extract from Hansard, in which Viscount Ullswater, when referring to the Employment Rights Act 1996’ equivalent provision at s.203(3), said: “these procedures should only be available in the context of an agreement which settles a particular complaint that has already arisen between the parties to that complaint”. Mr Bathgate stated it was clear from this that Parliament did not intend the legislation on settlement agreements to cover the settlement of future unknown statutory claims.

The EAT concluded that, regardless of the intention of the parties, s.147(3)(b) EqA 2010 did not allow future claims to be waived.

The Court of Session’s Decision

Technip appealed this point to the Court of Session. It argued that the true legal position (as set out in Hilton) was that an unknown future statutory claim may be settled by a waiver where the intention of the parties is plain and unequivocal. Applying this, Technip argued that the terms of its agreement with Mr Bathgate were sufficiently clear, such that Mr Bathgate’s claims had been settled. Technip also warned that if the legislation prevented future unknown claims from being settled, it would become impossible for parties to reach full and final settlement of all claims.

Technip succeeded. The Court of Session found that future statutory claims under the EqA 2010 could be settled provided the “types of claims are clearly identified and the objective meaning of the words used is such as to encompass settlement of the relevant claim”. It was said that the requirement at s.147(3)(b) EqA 2010 for a settlement agreement to relate to the “particular complaint” does not mean that the claim had to be known at the time of contract. In other words, it does not matter whether the claim actually exists at the time of settlement. Instead, “all that matters is the presence or absence of a waiver of sufficient identification of the complaint being made”. In this case, the terms of the settlement agreement were sufficiently clear, meaning the age discrimination claim advanced by Mr Bathgate had in fact been settled at the time of agreement.

Comment

The Court of Session’s decision is not binding on ET’s and the EAT in England and Wales. However, it will be considered highly persuasive, and, in practice, we would expect it to be followed by the English and Welsh tribunals.

As some readers will have noticed, this case concerned settling future unknown claims under the EqA 2010 only. However, the decision should still apply to settlements under other statutes as long as there is a corresponding provision to s.147(3)(b) EqA 2010. For example, s.203(3)(b) of the Employment Rights Act 1996 requires a settlement agreement to “relate to the particular proceedings”.

More generally, the Court of Session’s decision is consistent with previous cases such as Hilton, meaning parties can have greater confidence that a plain and unequivocal waiver of future unknown statutory claims will be enforceable. However, the drafting of any waiver still requires careful consideration and parties should always take legal advice to ensure their intentions are reflected in an enforceable settlement agreement.

The Employment Team at Edwin Coe are highly experienced at negotiating and drafting settlement agreements. If you need advice in relation to a settlement agreement, or indeed any other employment related issue, please do not hesitate to contact Linky Trott or any other member of the Employment Team.

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