The Employment Appeal Tribunal (EAT) has confirmed in the case of Clifford v IBM United Kingdom Ltd (2024) that settlement agreements can settle unknown future claims, so long as it is clearly stated within the settlement agreement that it is the intention of the parties that such future claims are waived.
Bathgate v Technip UK Ltd
In the case of Bathgate v Technip UK Ltd back in 2022, the Scottish EAT held that settlement agreements cannot compromise unknown future claims that an employee was not aware of at the time of entering into the settlement agreement.
The EAT held that: "In this case the claimant signed away his right to sue for age discrimination before he knew whether he had a claim or not. While that may be possible at common law, the [Equality] Act restricts parties’ ability to do so. The inclusion of a claim in a [settlement] agreement defined merely by reference to its legal character or its section number does not satisfy the language of [the Equality Act]. The words ‘the particular complaint’ suggest that Parliament anticipated the existence of an actual complaint or circumstances where the grounds for a complaint existed. I do not consider that the words ‘the particular complaint’ are apt to describe a potential future complaint."
Settlement Agreements
For settlement agreements to be valid, they must comply with conditions set out in the Employment Rights Act 1996 (and corresponding provisions in related legislation). One of those conditions is that it must relate to a "particular complaint" / “particular proceedings”, the operative word being "particular".
In Bathgate, the EAT's view was that the intended meaning of the word "particular" meant that what was compromised by settlement agreements was confined to causes of action that had already arisen, as opposed to any possible future causes of action.
Court of Sessions Appeal
Nevertheless, the Bathgate case was appealed to the Court of Session (CoS). The CoS held that "a future claim of which an employee does not and could not have knowledge may be covered by a waiver where it is plain and unequivocal that this was intended.....[The legislation does] not exclude the settlement of future claims so long as the types of claim are clearly identified and the objective meaning of the words used is such as to encompass settlement of the relevant claim”.
The Court added that in terms of the issue that a settlement agreement must relate to a "particular complaint" etc, this just requires "one to ask whether the complaint being made is or is not covered by the terms of the contract. They import no temporal barrier to post-employment claims of the kind."
Accordingly, the Court concluded that unknown future claims can be settled by a settlement agreement so long as it is clearly stated within the agreement that it is the intention of the parties that such claims are waived.
Clifford v IBM United Kingdom Ltd (2024)
As a Scottish case, the Court of Sessions decision in Bathgate was not binding in England and Wales, but was pursuasive.
The case of Clifford v IBM United Kingdom Ltd (2024), is as a decision of the EAT for England & Wales. As such, it now clarifies the position in England and Wales.
The EAT agreed with the analysis of the Court of Session in Bathgate, and held in Clifford that unknown future claims can be settled by a settlement agreement so long as it is clearly stated within the agreement that such a waiver is the intention of the parties.
Clean Break
The decisions in Bathgate and Clifford restore common sense. The whole point behind settlement agreements is to provide the parties with a clean break. To be able to do that, it is imperative that it is possible for settlement agreements to settle unknown future claims
