EAT confirms that future claims can be settled by settlement agreement
Employers can avoid employment claims from departing employees by using settlement agreements. These agreements must follow a specific format and the employee must get legal advice before signing. Recent legal cases have examined if settlement agreements can validly settle future unknown claims—those based on facts not existing and not known at the time of signing.
In Bathgate v Technip, the Scottish Court of Session ruled that future unknown claims can be settled if the waiver is clearly worded. This has now been affirmed by the Employment Appeal Tribunal in Clifford v IBM. In this case, the Claimant, who was absent due to disability, entered a compromise agreement (now called a settlement agreement) in 2013. It was agreed that he would remain employed but would move to the Respondent’s disability plan. Under the agreement, the Claimant waived the right to bring 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 later claimed disability discrimination due to receiving no increase in payments 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.