A step into the unknown – waiving future claims by settlement agreements (UK)
You would think that in the twenty-plus years since they were first introduced as an alternative to the Acas COT3, all that could be said about the law relating to settlement agreements would have been said. However, along now comes the Scottish Employment Appeal Tribunal in Bathgate –v- Technip UK Limited and Others with a new look at exactly how far those waivers can go.
Section 147(3)(b) ERA requires a valid settlement agreement to identify “the particular claim” being waived. Acas suggests that there are some 97 separate statutory claims which can be made in the Employment Tribunal. That is why many settlement agreements contain a great long list of potential causes of action, whether they have anything to do with the present case in question or not – in that way, goes the thinking, there can be no question but that a particular head of claim has been identified, even if it is maternity rights for men, minimum wage claims for CEOs and some frankly specialist-interest affairs like working time on hovercraft for almost everyone.
The question in Bathgate is whether that requirement to identify the particular claim being waived excludes claims in relation to matters which have not yet arisen and/or of which the employee is unaware. Mr Bathgate was made redundant and signed a settlement agreement which referred to the possibility of an enhanced payment subject to employer discussions under a collective agreement with the relevant trade union for those members made redundant under the age of 61. Bathgate was 61 but nonetheless expected to receive that sum, although the EAT’s judgement is not clear on why he would have thought that. When he did not get it, he sued his employer for age discrimination. Technip freely admitted that the sum had been withheld because of Bathgate’s age, i.e. over the maximum provided for by the enhanced severance scheme. However, the settlement agreement he had signed stated in terms that it covered any claims he might have for age discrimination, so how could he succeed with that?
The primary part of the case (all ultimately pointless on these facts because of a secondary argument we will come to shortly) was whether the section 147(3)(b) requirement to identify the particular claim could cover circumstances which had not yet arisen and of which the employee therefore had no knowledge. As a matter of ordinary contract law an employee can agree to waive claims of which he is unaware or in relation to events which have not yet taken place provided that the agreement wording is clear and unambiguous enough to show that he did genuinely intend such a wide and unusual settlement. But as the EAT stressed here, that is contract law and not necessarily enough to satisfy the rules around statutory settlement agreements. The EAT was clear that a rolled-up blanket waiver along the lines of “all claims of any nature arising out of the employment or its termination”, while effective contractually, would not be statutorily valid by itself. It also decided that if the settlement agreement had to refer to a particular claim in order to waive it, it could not realistically cover claims which the employee did not know about.
However, the EAT could perhaps have been more helpful around the application of settlement agreements to (i) claims in respect of matters which had already happened by the time of the agreement but the employee was unaware of them on the one hand, or (ii) claims which had not yet arisen but of which the employee was aware on the other. Unfortunately the judgement seems to assume that the fact that an event had not yet happened is synonymous with the employee not being aware of it, which will be true often but not invariably.
The EAT quoted an extract from Parliamentary recorder Hansard during the original debate on the proposed new settlement agreement – that suggested that the intention had been to allow settlements of a complaint “that has already arisen between the parties to that complaint”, i.e. those disputes which were both existing and known. Mr Bathgate said on that basis that as his entitlement to the additional sum depended on discussions which did not conclude until a month after he signed, his waiver could not be valid, and the EAT agreed. Disconcertingly, it said that “while language can be used loosely and ordinarily a complaint might include a potential complaint…the statutory language excludes this possibility” and then “it does not seem to me that there is any difference in principle between a rolled-up waiver [the “all claims of any nature” wording above] and a waiver which lists a variety of possible claims by reference to their nature or section number. Both are general waivers. All that distinguishes them is the particularity with which they have been drafted. I do not consider that one provides any more protection than the other“.
This is scary stuff for employers since it suggests that it is no longer possible (if it technically ever was) to waive a prospective unfair dismissal or discrimination claim just by including reference to unfair dismissal or the Equality Act in the settlement agreement. Instead it would seem that the waiver must relate expressly to the circumstances of the individual case, perhaps to the employee’s termination for a particular reason on a particular date, or through a reference to a grievance or legal correspondence or pleadings in which specific claims and allegations are rehearsed.
In addition we are left looking again at what can be done to waive complaints the grounds of which are known and can be described in detail enough to intimate a particular claim even though they have not yet happened. It cannot simply be a question of timing of events relative to the completion of the settlement agreement. If Bathgate’s settlement agreement had said in connection with the additional sum, for example “…and you agree to waive any claims you might have for age discrimination relating to this payment even if in a month’s time it is decided that you are too old to receive it”, it would surely be impossible to argue that the particular claim he would have if it were not paid has not been adequately identified for the purposes of section 147(3)(b) .
Another example of this principle in operation is the term you sometimes see in settlement agreements whereby the departing employee agrees to waive any claim he may have if, having left, he then re-applies to the same employer and is turned down. If he left following allegations of discrimination or the making of some protected disclosure, it is the easiest suggestion in the world that that is the reason for his rejection, and then he is off to the races with his shiny new victimisation claim, quite regardless of the merits of his earlier allegations or the damage he did to workplace relationships by making them. In the light of Bathgate, can that waiver still be valid? On the one hand there must be public policy considerations which militate against the employer effectively buying itself the right to victimise on a future occasion. On the other, if the clause is clear enough as to what is being waived (any claim arising from his not getting a job at a particular employer), it is again hard to see why it would not satisfy section 147(3)(b). That is especially as it concerns a circumstance wholly within the employee’s own control, i.e. his applying for a job with his former employer despite knowing of this term in his settlement agreement.
Opinions on this will vary but we believe that where the circumstance being waived is clearly-enough expressed within the settlement agreement, there is nothing in the mere fact of its not being guaranteed to happen and/or its falling at some future date which would take it outside the protections of the settlement agreement regime.
Last, why was all this dissection of “particular claim” redundant on the day? Because it turned out that by virtue of his life as sea-going mariner, the much under-rated Equality Act 2010 (Work on Ships and Hovercraft) Regulations 2011 excluded Bathgate from the protections of the Equality Act anyway. That last-ditch exeat should not lead employers to disregard this renewed attention placed on the requirement to identify the particular complaints being waived in their settlement agreements – the rest of the decision is of entirely general application.