Settling future claims

Can a settlement agreement settle claims that have not yet arisen? Some uncertainty remains following the Scottish Court of Session’s decision in Bathgate v Technip Singapore Pte Limited in which it overturned the Employment Appeal Tribunal’s 2022 decision on this matter.

The background is that an employee entered into a settlement agreement on redundancy under which he settled all of his claims against the employer. The agreement included waivers of any claim, including for age discrimination and stated that it applied “irrespective 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 (including such claims of which the Employee becomes aware after the date of this Agreement in whole or in part as a result of new legislation or the development of common law)”.

After he entered into the agreement, his employer decided that those over 60 when made redundant were ineligible for an additional redundancy payment. It was therefore not paid to the employee.

The employee made a claim of age discrimination, but the employer argued that such claim could not be made as he had waived claims for age discrimination under his settlement agreement, including claims of which he was not aware at the time of entering into the agreement.

The EAT ruled in the employee’s favour and found that the rules on settlement agreements only permitted waivers of “particular complaints” and that it could not therefore validly settle a claim that had arisen after the settlement agreement was entered into.

The employer appealed to the Court of Session. The Court of Session upheld the appeal and found that future claims can be validly waived in a settlement agreement provided that the wording of the agreement is sufficiently clear that the particular type of claim was being settled. In this case, the agreement was clear that age discrimination claims were covered and was clear that future claims were covered. On that basis, it held that the agreement was a valid waiver of such claims.

This decision is binding on settlement agreements to which Scottish laws apply. It is not in strict terms binding on English or Welsh settlement agreements. In England and Wales, there remains conflicting EAT authority on the point of settling future claims, although it is suggested that the Court of Session’s decision in this case would be seen as highly persuasive. It remains to be seen whether the point is appealed further. For the time-being, therefore, it is not possible to say definitively that future claims can be settled by settlement agreements and careful consideration should be given to the way in which agreements are drafted.

---

If you have any queries you would like to discuss regarding settling future claims please contact Rena Magdani or Matt McBride.

Read the other recent Employment articles:

• Job applicants not protected as whistleblowers
• Consultation on Employment Tribunal fees
• Codes of Practice and Guidance