Settlement agreements can settle unknown future claims

The Inner House of the Court of Session in Scotland has ruled that a settlement agreement can settle unknown future statutory employment claims, provided that the agreement clearly identifies the types of claim being settled and its wording encompasses settlement of the claim.

The settlement agreement

Mr Bathgate signed a settlement agreement on 29 January 2017, following the termination of his employment for redundancy; he was 61 years of age. Under the terms of the agreement, he was to be paid an enhanced redundancy payment, his notice pay and an additional payment, which was to be calculated by reference to the terms of a collective agreement. In return, he agreed not to pursue a long list of claims, including claims for direct and indirect age discrimination under S120 Equality Act 2010. The agreement also contained a more general waiver which included a waiver of future claims.

In March 2017, over a month after Mr Bathgate had signed the settlement agreement, his employer decided that under the terms of the collective agreement it did not need to pay the additional payment to those who were 61 or over at the time of dismissal. It told Mr Bathgate of this in June 2017.

Age discrimination claims

Mr Bathgate claimed this was direct or indirect age discrimination and brought a claim for post-employment discrimination. His employer argued that he could not bring the claim as it had been settled by the settlement agreement. The employment tribunal agreed, but the Employment Appeal Tribunal ruled that the statutory requirement that a settlement agreement must relate to “the particular complaint” in order to be binding, meant it could not settle unknown future statutory employment claims.

The employer appealed to the Inner House of the Court of Session, with the Court noting that the list of claims waived in the settlement agreement included age discrimination claims, even if they could not be known at the time of the agreement, and so, on the face of it, the claims were covered by the waiver. The Employment Appeal Tribunal had considered that the statutory requirement that the agreement must relate to “the particular complaint” meant the settlement agreement could not settle claims that had not arisen at that point.

The Court of Session disagreed and ruled that there is nothing in the legislation which excludes settlement of future statutory employment claims, so long as the types of claims are clearly identified and the objective meaning of the words used encompasses settlement of the relevant claim. If Parliament had intended to limit the ability to settle future claims, it could have done so expressly. The requirement that the agreement must relate to the particular complaint does not mean that the complaint must have been known of, or its grounds at least in existence, at the time of the agreement. All that needs to be considered is whether the complaint is covered by the terms of the agreement.

Bathgate v Technip Singapore PTE Ltd

What does this mean for employers?

Decisions of the Inner House of the Court of Session are not binding in England and Wales. However, they are highly persuasive and it is therefore likely that tribunals in England and Wales will follow it. With careful drafting, employers should therefore be able to settle unknown future statutory employment claims in a settlement agreement. 

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For information on how we can support you with Settlement Agreements, please contact a member of our Employment team.