Settlement Agreements - The holy grail to protecting your business from future claims or is it…?
The case of Bathgate v Technip UK Ltd & others has been in the employment spotlight for some time, but the recent decision from the Court of Session has finally clarified the position on relying on settlement agreements to waive all future employment claims. Even though it is a Scottish case, it will have application in England and Wales with the courts adopting a similar interpretation.
Why are settlement agreements useful?
Many employers seek to utilise and rely on settlement agreements to give the departing individual and the employer “a clean break.” It’s a useful bargaining tool which gives the employee a financial package and the employer the peace of mind that no employment claims will follow. Settlement agreements are often used before a potential claim materialises or afterwards as a means of settlement.
If you have seen a settlement agreement before, you will see that the wording often seeks to prevent the individual from bringing a whole host of claims upon signature of the agreement, including any potential future claims, which they are not already aware of. It is this particular issue which has been called into question by this case.
Mr Bathgate had been employed by Technip UK Ltd (Technip) for over 20 years before leaving his employment via settlement agreement. As with most settlement agreements, his agreement sought to exclude all future claims.
Shortly after termination of his employment, Technip decided to cancel the additional payment which was subject to a collective agreement and scheduled to be paid to Mr Bathgate in June 2017. This agreement stated the additional payment would be made only to those who had not reached the age of 61, Mr Bathgate was 61. Mr Bathgate was advised he would not receive this payment until long after he signed the settlement agreement, he brought a claim for age discrimination.
What was decided?
At first instance, the Employment Tribunal held that the settlement agreement had validly settled the age discrimination complaint. He subsequently appealed to the Employment Appeal Tribunal (EAT), where it was held that the settlement agreement could not and did not settle this future claim.
Section 147 of the Equality Act 2010 (which allows claims to be settled under a settlement agreement), does not allow for the settlement of a future claim which an employee does not know about at the time of the agreement unless the agreement relates to that “particular complaint.” Whilst the EAT found in favour of the Claimant here, the appeal was dismissed for other reasons.
A further appeal was brought to the Court of Session. The Court of Session held that a settlement agreement can exclude future claims where the agreement clearly identifies an intention to exclude claims which may arise in the future and are therefore encompassed within the agreement. As a result, the Court found that it was clear the agreement intended to cover claims which the parties were unaware of and so Mr Bathgate’s claim for age discrimination could not be pursued.
What does this mean?
This case is particularly important for all employers and in particular, ensuring you have an adequately drafted settlement agreement in place to avoid any future liability for claims which have not yet arisen or even in contemplation. The viewpoint that a settlement agreement can prevent an ex-employee from ever bringing any claim against the company is not true. Unless you have clearly detailed possible future claims which you wish to exclude, you will not be immune from litigation.
If you’d like any advice on issuing or drafting settlement agreements, please don’t hesitate to get in touch – we’ll be happy to help.