Settlement agreements cannot waive unknown future claims

In the case of Bathgate v Technip UK and others, the Employment Appeal Tribunal (EAT) has recently held that the Equality Act 2010 does not allow for the settlement of future claims that are unknown at the time of entering into the settlement agreement.

Background

Mr Bathgate was employed by Technip Singapore PTE Limited (Technip) for almost 20 years, most recently in the role of Chief Officer on a number of shipping vessels. Technip went through a redundancy process and, following a redundancy scoring exercise, Mr Bathgate was advised he was at risk of redundancy. He was offered, and accepted, redundancy terms under a settlement agreement which he signed on 31 January 2017. At the point of signing, Mr Bathgate was aged 61. The settlement agreement included an enhanced redundancy payment and a sum in respect of his notice which were payable with his final salary. The agreement also provided for a further sum, the “Additional Payment”, which was to be calculated by reference to a maritime collective agreement.

In March 2017, several weeks after the settlement agreement was concluded, Technip took the decision that the Additional Payment need not be paid to employees who were 61 or over at the time of dismissal. Mr Bathgate was informed of this decision in June 2017. He brought a Tribunal claim on the basis that the decision not to make the Additional Payment to him amounted to direct and/or indirect age discrimination. Technip resisted the claim on the basis that, by signing the settlement agreement, Mr Bathgate had waived his right to pursue any further claim against the company.

The employment tribunal agreed with Technip and found that the claims of direct and indirect age discrimination were precluded by the terms of the settlement agreement. The agreement included wording stating that the terms were in full and final settlement of the claims that Mr Bathgate ‘intimates and asserts’ against Technip, which included direct and indirect age discrimination claims under the Equality Act. It also included a general waiver of all claims “of whatever nature (whether past, present or future)” arising out of or in connection with Mr Bathgate’s employment. He appealed this decision.

Employment Appeal Tribunal Decision

The EAT allowed the appeal and held that the settlement agreement could not settle Mr Bathgate’s claim of age discrimination. The EAT confirmed that a particular complaint must be identified in the settlement agreement, either by a generic description or by reference to a statutory provision, in order to validly waive that claim. Although direct and 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 the age discrimination claim had been specifically identified in the agreement. The EAT made reference to the Employment Rights Act 1996 where Parliament had indicated that settlement agreements should only be able to settle a “particular complaint” which has already arisen between the parties.

In this case, Mr Bathgate had signed away his right to bring a claim of age discrimination under the terms of the settlement agreement without knowing whether he had a claim to bring. The EAT considered that this is not permitted under the Equality Act. The EAT further considered 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. The EAT noted that this interpretation may not be welcome where the parties have a mutual intention to avoid future claims; however, the EAT surmised that Parliament did not consider the settlement of this type of claim to be desirable and legislated to prevent this.

Comment

This case clarifies that it is only possible to waive statutory employment claims where an actual complaint exists or circumstances exist that give rise to grounds for a complaint. In this case, the circumstances giving rise to the age discrimination claim only came into existence after signing, so could not be waived under the settlement agreement.

It is common practice for settlement agreements to seek to settle future unknown claims. This case may herald a change of direction and almost certainly risks the possibility of more litigation on the validity of waivers. To reduce this risk, employers should ensure that they identify, as clearly as possible, the particular claims to be settled under a settlement agreement.