In this case the Employment Appeal Tribunal (EAT) confirmed that a settlement agreement can settle claims which arise after the agreement has been signed, even when the employee remains in employment.
Background and facts
There have been several cases on the ambit of a settlement agreement and discussion about whether it can settle future claims. In the recent case of Bathgate v Technip Singapore PTE Ltd (Bathgate), the Scottish Court of Session held that a settlement agreement can be used to settle unknown future claims provided that the types of claim are clearly identified and the objective meaning of the words used encompasses settlement of the relevant claim (see our alert here). In particular, the waiver must specifically identify the relevant claims by a generic description or a reference to the statute section giving rise to the claim and be "absolutely plain and unequivocal" in relation to future claims.
Mr Clifford was employed by IBM United Kingdom Ltd (IBM). He was continuously absent from work due to ill health from September 2008. In 2012, he brought a grievance against IBM. This grievance related to various matters, including IBM's failure to transfer him to its disability plan.
Following the grievance outcome, the parties entered into a settlement agreement in April 2013. Under the terms of that agreement, Mr Clifford would move to the disability plan (but remain in IBM's employment) and receive disability salary payments at a specified level. In return, he waived the right to bring various specified claims (including for disability discrimination), whether or not the claims were or could be in the contemplation of the parties at the date of the agreement. There was an exception in respect of future claims. This exception did not apply to matters connected to his grievance or arising from his transfer to the disability plan.
Several years later, Mr Clifford brought disability discrimination claims against IBM. He argued that, since his transfer to the disability plan, he had not had an annual salary review, his salary had not been increased and his annual leave payments had been at a reduced rate compared to employees not on the disability plan. Following a preliminary hearing, an employment tribunal struck out his claims on the basis that the settlement agreement precluded them and the claims had no reasonable prospects of success. Mr Clifford appealed.
The EAT dismissed the appeal and held that the employment tribunal was correct to strike out the claim on the basis that it was precluded by the settlement agreement. Applying the Court of Session’s decision in Bathgate it held that future claims could be validly compromised even if unknown by the employee at the time the agreement was concluded. While in the Bathgate case the claimant's employment had ended and in Mr Clifford's case his employment continued, the EAT considered that this was not a relevant distinction. Both cases concerned future claims that had not arisen at the time the settlement agreement was signed.
What does this mean for employers?
This case helps clarifies the law. As the Bathgate case was a Scottish Court of Session decision, it was not binding on courts outside of Scotland. As an EAT (England and Wales) decision, this case will be binding on tribunals in England and Wales. This case also goes further in that it covers a situation where the claimant is still in employment and therefore the prospect of new claims arising is higher.
That said, this case concerned an inactive employee (in effect, on an ill-health plan) and so it remains unclear if an active employee had agreed to waive “any and all” future claims that the Courts would be willing to reach the same judgment. In this case, the future claims identified as being waived by the settlement agreement were quite limited, and Mr Clifford’s claims clearly fell within the scope of the waiver. The Employment Judge who dealt with the case at the tribunal stage commented that it would be contrary to public policy to allow a claim of sexual harassment to be settled on the basis that complaints about any future acts of sexual harassment were also waived. The EAT did not comment on this.
Employers will need to make sure that settlement agreements are very clearly drafted to put themselves in the best position to cover future claims. Any employers with template agreements should review the wording of their agreements, to make sure that they are drafted appropriately on this particular point.
