EAT Confirms Settlement Agreements Can Waive Future Claim

The Employment Appeal Tribunal (the “EAT”) has confirmed that future employment claims can be validly waived under a settlement agreement, provided that clear language is used.

Settlement agreements

A settlement agreement is a contract whereby an employee or worker agrees not to pursue certain statutory employment tribunal claims against a respondent or potential respondent to a claim in return for “consideration” (normally a sum of money).

Section 147 of the Equality Act 2010 (the “Act”) sets out the meaning of a “qualifying settlement agreement” which states that, amongst other conditions, it must relate to a “particular complaint”.

Background

The recent decision of the EAT in Clifford v IBM United Kingdom Ltd [2024] EAT 90 (“Clifford”) confirms that claims can be waived whether or not they were or could be in the contemplation of the parties at the date of the agreement, provided that clear language is used.

In Clifford, the claimant employee was continuously absent from work due to ill health from September 2008. In 2012, the claimant filed a grievance which included a complaint that he had not been transferred to the respondent employer’s disability plan.

Subsequently, the parties entered into a settlement agreement (the “Settlement Agreement”) whereby the claimant would move to the disability plan and receive disability salary payments. In return, the claimant waived his right to bring certain specified claims (including discrimination claims), whether known or unknown. The Settlement Agreement explicitly excluded future claims related to the subject of the grievance.

Several years later, the claimant brought disability discrimination claims against the Respondent relating to situations which had happened after he signed the Settlement Agreement. In particular, he complained that since his transfer to the disability plan, he had not received an annual salary review or pay increase and other payments had been at lower levels than those offered to his colleagues who were not on the disability plan.

The Employment Tribunal dismissed the claims on the basis that the terms within the Settlement Agreement precluded them and therefore the claims had no reasonable prospects of success.

The Claimant appealed to the EAT. The key issue for the EAT to decide was whether the Settlement Agreement complied with the requirement in section 147 of the Act, specifically that the contract relates to a “particular complaint”.

The EAT agreed with the Court of Session’s analysis in Bathgate v Technip Singapore PTE Ltd [2023] CSIH 48, confirming that this requirement does not mean the complaint must have been known about by the parties or that its grounds were in existence at the time of entering into the agreement.

It simply requires one to ask whether the complaint being made is or is not covered by the terms of the agreement. The EAT found that the new pleaded claims plainly fell within the terms of the waiver in the Settlement Agreement. The EAT therefore held that the Settlement Agreement complied with section 147 and prevented the Claimant’s disability discrimination claim.

It is worth noting that Mr Clifford wasn’t in active employment under the Disability Plan at the time and so, although he remained employed, he did not have an ongoing active employment relationship. He had been arguing that benefits under the disability plan weren’t enough compared to those remaining in full-time employment. It is therefore possible that cases involving individuals in ongoing employment may be treated differently by the Tribunal in the future.

What can employers do?

The decision in Clifford provides authority that carefully worded settlement agreements can validly waive future claims, including those not in existence or contemplation at the time of the agreement.

However, the agreement must include clear and specific wording as to which future claims are prevented by the agreement. The claims must be identified either by a generic description (such as “unfair dismissal”) or by reference to the section of the statute giving rise to the claim. This means that the intention to waive future claims must be explicitly stated, and the wording cannot be ambiguous or vague.

Employers should, therefore, carefully draft settlement agreements, ensuring each specific future claim they intend to preclude is clearly referenced.

If you would like assistance with drafting your settlement agreements, please contact a member of the Employment team.

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