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EAT confirms that future claims can be settled by settlement agreement
Adrian Fryer
Employers who wish to avoid the risk of employment claims from departing employees are able to enter into a settlement agreement under which employment claims are settled.
Settlement agreements must follow a certain format and the employee is required to take legal advice before signing one. In recent years, there have been legal cases looking at the extent to which settlement agreements are able to validly settle future unknown claims. That is, claims based on facts or circumstances which have not occurred at the point that the settlement agreement is signed, and which are not known to the parties. One of the reasons for uncertainty in this area was that the legal provisions regulating settlement agreements said that they had to settle ‘particular complaints’. There were arguments over whether future unknown claims could be caught within this term.
Earlier this year, in the case of Bathgate v Technip, the Scottish Court of Session held that future unknown claims could be settled using a settlement agreement, provided that the wording of the waiver was sufficiently clear.
This position has now been followed by the Employment Appeal Tribunal in Clifford v IBM. In this case, the Claimant was absent from work owing to disability from 2008 onwards. In 2013, he entered into a compromise agreement under which the Respondent agreed to place him on its Disability Plan. Compromise agreements are the old name for what are now called settlement agreements. The plan gave the Claimant disability salary payments. Increases under the plan were discretionary.
Under the terms of the compromise, the Claimant waived the right to bring various specified claims, including disability discrimination claims, whether they were or could be in the contemplation of the parties at the date of the agreement, or not. An exception in respect of future claims did not apply to matters arising from the Claimant’s transfer to the Plan.
The Claimant brought a claim of disability discrimination on the basis that payments had never increased under the Plan. The tribunal struck out his claim. It was a future claim but was clearly barred by the terms of the compromise agreement. It made no difference that the Claimant remained in employment.
This case is a reminder that it is possible to settle future unknown claims using a settlement agreement but that the wording used is of crucial importance. It needs to be clear and expressly state that it covers claims which were not or could not be in the contemplation of the parties when they signed the agreement.