Employees can waive future claims under a settlement agreement

In a helpful development for employers, the Employment Appeal Tribunal has confirmed that a settlement agreement can settle claims which arise after the agreement has been signed, even when the employee remains in employment.

This confirms the approach taken in last year’s decision by the Scottish Court of Session in the Bathgate case. In that case, the court decided that Mr Bathgate could not make an age discrimination claim against his employer because he had already signed a settlement agreement which covered that claim.  The waiver was valid even though the new claim had arisen after the agreement had been signed.

However, there was still some uncertainty in relation to this decision.  As it was a Scottish Court of Session decision, it would not be binding on courts outside of Scotland.  The recently decided case of Clifford v IBM United Kingdom Ltd has now removed that uncertainty: as an EAT decision, it will be binding on tribunals in England and Wales (unless appealed and overruled).

Employee transferred to disability benefit scheme under a settlement agreement

Mr Clifford had been off sick since 2008 and, in 2012, he raised several grievances with IBM, including allegations of disability discrimination.  As an outcome of those grievances, he was placed on IBM’s long-term disability benefit scheme (the “Disability Plan”).  He also signed a settlement agreement (referred to as a “compromise agreement” at that time) waiving all employment claims.  The agreement contained wording expressly excluding future claims from the scope of the waiver, but only those which were “(i) not connected with the matters set out in the Grievance or Appeal; or (ii) do not arise out of the Claimant’s transfer to the Disability Plan”.

Mr Clifford brought new claims in 2022.  He alleged, among other things, that he had been discriminated against because he had not benefited from any salary reviews, or increases in line with other employees, during the period he had been on the Disability Plan. 

Mr Clifford’s argument was originally that it was not possible to settle future claims.  However, after the Court of Appeal confirmed in Bathgate that this was indeed possible, Mr Clifford then sought to argue that his case was significantly different to the situation in Bathgate because his employment was continuing, whereas in Bathgate the employment had already ended by the time the new claim was brought. He further argued that Bathgate was wrongly decided. 

Employment Appeal Tribunal confirms settlement agreement covered future claims

The Employment Appeal Tribunal agreed with the Employment Tribunal in this case, finding that Mr Clifford’s current claims fell within the scope of the waiver set out in the compromise agreement.

Although it was true that the employment in Bathgate had ended, this did not give rise to any relevant differences between that case and Mr Clifford’s.  The EAT did not think Bathgate had been wrongly decided.

The statutory conditions regulating compromise (now settlement) agreements do not impose any restrictions on the kinds of claims, or the timing of such claims, which can be settled, as long as clear language is used and the agreement relates to the particular complaint.

Although academic only, in light of their decision on the waiver, the EAT also said that they would not have considered the claim to have any reasonable prospect of success in any event.  The EAT would not have concluded that failure to increase an already extremely favourable benefit could be considered unfavourable or less favourable treatment on grounds of disability.

What does this mean for employers?

We discussed the impact of the Bathgate case in our earlier article. This case, in confirming the position in England and Wales, has reinforced the points made at that time.

In this case, the future claims identified as being waived by the compromise agreement were relatively limited, and Mr Clifford’s 2022 claims fell squarely within the scope of the waiver.  Arguably, it was easier for the EAT to find that the waiver of future claims was binding in this case because it was so specific, and ultimately the employee in this case was claiming that a generous benefit was not generous enough.  The judge who dealt with the case at the earlier tribunal hearing commented that it would be contrary to public policy to, for example, allow a claim of sexual harassment to be settled on the basis that complaints about any future acts of sexual harassment were also waived. The EAT did not comment on this.

Negotiations relating to the scope of a waiver are likely to become more common; and advisers on both sides should take care to tailor each settlement agreement to the circumstances.  This is particularly relevant where employment is continuing and therefore the prospect of new claims arising is higher.

Employers might also consider requesting that employees sign settlement agreements prior to moving onto a long-term disability scheme so as to avoid having to deal with claims arising during the term of the scheme. This may not always be appropriate but could be especially useful if there has already been a dispute.

Clifford v IBM UK – judgment available here