Settlement Agreements: Future Employment Claims

Settlement agreements are legally binding contracts between employers and employees. They are often used to resolve disputes without going to court, which can be expensive and time-consuming. In essence, the employee agrees to give up any legal claims they may have against their employer in exchange for some kind of compensation, like money or a reference letter.

A recent court ruling in the case of Bathgate v Technip UK Ltd [2022] EAT 155 has stated that settlement agreements cannot waive future claims that have not happened yet.

In this case, Mr. Bathgate accepted voluntary enhanced redundancy and signed a settlement agreement, which included a payment that was to be calculated based on a Collective Agreement. However, the Collective Agreement only applied to staff under 61 years old, despite Mr. Bathgate being 61 years old himself. Mr. Bathgate believed he was entitled to the payment.

When his employer refused to pay him due to the age limit, Mr. Bathgate claimed age discrimination, but his claim was initially rejected by the tribunal because of the waiver clause in the settlement agreement.

Mr. Bathgate appealed, and the Employment Appeal Tribunal (EAT) ruled in his favour, clarifying that settlement agreements cannot cover future claims that have not yet arisen at the time of signing.

What does this mean for employers?

For employers, it is important to take note of the EAT’s decision and be aware of the risk of future litigation on the scope of the waiver. Employers offering settlement agreements should seek advice on specific circumstances and ensure that the particular claims are identified, especially if employers are using template agreements. Employers should also ensure that any outstanding issues between the employer and the employee are dealt with prior to entering into a settlement agreement in order to mitigate against future litigation. Further, that any conditions relating to payments being made are clearly laid out.

In summary, settling future claims is like trying to predict the weather; it is impossible to know what will happen. So, employers should take care when drafting settlement agreements to avoid any future storms of litigation.

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