388: Settlement agreements: Can employers really prevent future claims of the unknown?

In the case of Bathgate v Technip, the Scottish Employment Appeal Tribunal (EAT) has recently cast doubt on the protection offered to employers by way of settlement agreements. It has ruled that a settlement agreement cannot settle future claims which are unknown at the date of the agreement.

Statutory employment claims, such as unfair dismissal and discrimination, can only be waived or settled in settlement agreements or through Acas COT3 agreements. For a settlement agreement to be valid, it must relate to a “particular” complaint which is clearly identified in the agreement. Although a blanket waiver of all future claims will be ineffective, it is usual for settlement agreements to include a comprehensive list of all possible claims using a generic description or statutory section number.

Mr Bathgate worked for Technip for many years as a Chief Officer on board foreign-flagged ships outside the UK and then onshore in Scotland. In January 2017, he took voluntary redundancy under a settlement agreement which agreed to various enhanced payments in return for settling all future claims. One of these additional sums, to be paid in June 2017, was due under a maritime collective agreement (predating age discrimination legislation) which stated that payments only applied to officers under the age of 61. Around a month after his settlement agreement was concluded, Technip decided not to make this payment because Mr Bathgate had been 61 at the time of his dismissal. Mr Bathgate brought an Employment Tribunal claim alleging that this amounted to age discrimination.

The Tribunal held that Mr Bathgate could not proceed with his case because the settlement agreement had waived any age discrimination claims under the Equality Act 2010 as well as all claims “of whatever nature (whether past, present or future)” arising out of his employment.

However, the EAT has now allowed Mr Bathgate’s appeal, ruling that his particular age discrimination complaint could not have been waived as it was not identified in the agreement, he had no knowledge of it at the date of the agreement, and the legislation does not allow a settlement agreement to settle future unknown claims. Nonetheless, Mr Bathgate’s claim failed because the EAT also held that he was excluded from the scope of the Equality Act due to his seafarer status.

The EAT also made some wider comments about the common practice of including all potential claims in settlement agreements, highlighting that the clear intention behind the legislation was to allow settlement of the particular statutory claims which have already arisen between the parties, not potential future claims. Listing all possible types of complaints by reference to their legal character or section number, whether or not they are relevant, is therefore contrary to the purpose of the legislation.

Employers will not welcome the EAT’s comments. However, it has always been doubtful whether future unknown statutory claims can be effectively waived in a settlement agreement, although the same restrictions do not apply to an Acas-conciliated COT3 agreement. It will often be appropriate to list claims going beyond the employee’s immediate complaint. For example, in a redundancy situation an employer may want to settle potential claims for disability or sex discrimination if these are directly relevant to the employee’s circumstances. However, as this case illustrates, it is unlikely that any settlement agreement can provide a guaranteed waiver of every possible future statutory claim.

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