UK: Settlement Agreements Cannot Settle Unknown Future Claims
Authors: Corinna Harris and Charles Urquhart
Mr Bathgate, the Chief Officer on a ship, accepted voluntary redundancy at the age of 61 and entered into a settlement agreement with Technip UK Limited which provided that its terms were in full and final settlement of his complaints and claims, including age discrimination claims. The agreement entitled him to an “additional payment” calculated by reference to a particular collective agreement, but Technip later refused to pay the “additional payment” because the relevant term in the collective agreement only applied to officers aged under 61.
Mr Bathgate alleged that this refusal to pay the additional payment was age discriminatory, but the tribunal held that his age discrimination claim had been settled lawfully.
However, the EAT found that Mr Bathgate’s age discrimination claim could proceed because he couldn’t compromise his right to bring a claim for age discrimination when he didn’t know of the existence of that claim at the time of the agreement. The EAT stated that the legislation requires settlement agreements to identify “the particular complaint”, which isn’t satisfied merely by listing claims defined by reference to the type of claim or the relevant section number from the legislation.
Key Action Points for Human Resources and In-house Counsel
There has been uncertainty for some time as to whether a settlement agreement enables the employer to settle hypothetical claims which may arise in the future. This decision, in contrast to previous cases, suggests that a settlement agreement can only protect employers from claims which have been made or raised by the employee at the date of the agreement – and not from potential future claims unknown to the parties at the time of entering into the agreement.
Although this wasn’t relevant in this case, to reduce the risk of claims arising after the settlement agreement is signed and potentially not being protected under the agreement, it is advisable for the agreement to be signed as close to the employee’s termination date as possible.