Settlement agreements – settling the unknown future?

The recent case of Bathgate v Technip UK Limited and others has thrown doubt on whether a settlement agreement can settle all future claims.

The facts of the case

Mr Bathgate agreed to take voluntary redundancy in return for a compensation payment and subsequently entered into a settlement agreement with his employer. It included the common term that he agreed to settle all future claims against his employer.

There was also a collective agreement in place in respect of Mr Bathgate’s employment which provided for an additional sum to be paid to individuals for redundancy, if they were under the age of 61 at the time of dismissal. Mr Bathgate was under the impression that he would receive this payment. However, because he had in fact reached the age of 61 at the time his employment terminated, his employer did not make the additional payment. He alleged that this was an act of age discrimination and brought a claim.

The decision

The employer relied on the settlement agreement terms, stating that Mr Bathgate could not bring the claim because he had settled future claims, including age discrimination.

The Employment Tribunal agreed with the employer. However, on appeal, the Employment Appeal Tribunal ruled that a settlement agreement must settle a “particular complaint”. It therefore could not settle future unknown claims and Mr Bathgate was entitled to bring the age discrimination claim.

What does this decision mean for employers?

Prior to the decision in Bathgate, there had been a degree of uncertainty regarding the extent to which future claims could be waived. It was widely understood to be limited to cases where the facts relied upon to sustain the later claim were known at the time of the settlement, even if they had not been articulated as a specific claim. In this case Mr Bathgate had not known about the age discrimination claim or the facts that would subsequently give rise to it, so that he could not have settled or waived the claim.

Although the decision might be of concern to some employers, it confirms what most practitioners had believed to be the case following precedents set by existing case law.

Top tips for employers

• Be transparent with your legal adviser

Discuss any contentious points or potential claims you consider an employee may have.  Equipping your legal adviser with all the relevant facts will enable them to prepare an agreement which can be detailed and tailored to the circumstances.

• Consider including in settlement agreements provisions which might afford greater protection

Examples include:

– requiring a re-affirmation statement (or duplicate settlement agreement) to be signed on the actual termination date where there is a gap between the settlement agreement being drawn up and the actual termination date

– making termination payments in instalments over a period of time

– requiring an employee to warrant that they are unaware and/or do not intend to bring any future claims against the employer

• Consider using an ACAS conciliated COT3 Agreement

This is a specific type of agreement which can be used to settle employment claims and under which future claims can be waived even if unknown at the time the agreement was entered into.