By Joanne Bell & Hilary Larter
|Published 19 February 2024
A recent decision from the Scottish Court of Session makes clear that employers can settle future claims which are unknown at the time of entering into a settlement agreement, even if the basis for the claims has not yet arisen – "so long as the types of claim are clearly identified and the objective meaning of the words used is such as to encompass settlement of the relevant claim".
Between April 1997 and January 2017, Mr Bathgate was employed by Technip Singapore Pte Ltd as Chief Officer aboard a number of vessels. In the latter half of 2016 Technip undertook a redundancy exercise. Mr Bathgate was made redundant and entered into a settlement agreement, which covered discrimination on the grounds of age. The agreement also included waivers in more general terms. In particular one clause provided that the waiver 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)".
The redundancy payment consisted of two sums: an enhanced redundancy payment and an additional payment calculated under a collective agreement negotiated with a trade union. Discussions between Mr Bathgate and Technip during the redundancy process led Mr Bathgate to believe that he would receive the additional payment. However, Technip later realised that Mr Bathgate was ineligible for the additional payment as he was 61 years old at the date of termination of employment and the collective agreement only applied to employees under the age of 61. Mr Bathgate submitted a claim to the employment tribunal alleging that this amounted to age discrimination.
The employment tribunal found that the claims of age discrimination had been validly settled in the settlement agreement, however, the Employment Appeal Tribunal allowed the appeal and decided that the settlement agreement could not settle Mr Bathgate's unknown future claims.
The Court of Session found that a settlement agreement can waive unknown future claims where the waiver of such claims is plain and unequivocal. Essentially it boils down to how clear the agreement is and whether it covers the complaint. The Court agreed with earlier case law that a blanket waiver will not be sufficient (e.g. to settle "all statutory rights"). As a minimum the claims waived must be identified by a generic description (such as "unfair dismissal" or "age discrimination") or a reference to the section of the statute giving rise to the claim. The Court said there was nothing in the relevant legislation to suggest that a future complaint cannot be sufficiently particularised in a settlement agreement and therefore the settlement agreement could settle a claim that arises after the agreement is reached.
Here the waiver in Mr Bathgate's agreement related to all claims, irrespective of whether the employee was aware of them at the date of the agreement, and listed age discrimination as one of the claims being settled. As such the Court concluded that Mr Bathgate's age discrimination claim could not be pursued.
This is an interesting case coming on the back of the recent judgment in Ajaz v Homerton University Hospital NHS Foundation Trust about claims settled via an Acas COT agreement which we have reported on recently – click here to read the article.
There has been uncertainty for some time about whether an employer can use a settlement agreement to settle claims that the employee is not aware of or have not actually arisen at the time the agreement is reached.
Whilst the Court of Session's judgment is not binding on employment tribunals and the EAT in England and Wales, it will be highly persuasive. As such, this decision is obviously a positive one for employers as it means future claims can be settled, even where such claims are unknown or the circumstances on which the claims are based have not even arisen at the date the settlement agreement.
That said, careful drafting is still needed to ensure the agreement is valid. It will be necessary to particularise claims of concern in the settlement agreement, either by way of a generic description or reference to the relevant statutory provision. In addition there must be very clear wording that the settlement includes claims arising in the future, whether they are known or not and whether the circumstances have arisen or not.
It is not yet know whether Mr Bathgate will seek permission to appeal to the Supreme Court, therefore this decision may not be the final word on the issue.
