Settling future claims – how clear must the crystal ball be?
The Court of Session, in Bathgate v Technip Singaport PTE Limited recently had cause to consider three questions: (i) the proper interpretation of the term “seafarer” in section 81 of the Equality Act; (ii) whether an exception from discrimination protection arising from section 81 continues to apply in respect of post-employment claims under s108; and (iii) whether a settlement agreement ousted the tribunal’s jurisdiction in respect of a discrimination claim arising after the settlement agreement was reached.
The court disposed of the appeal on the basis of their answer to the third question and that is the question of most interest to employment practitioners.
Put briefly, the answer is yes you can settle future claims which have not yet arisen so long as such a claim is sufficiently identified within a valid settlement agreement.
In the words of the judgment
“… we consider that the various protections for the employee built into section 147 do 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 requirement that the contract must “relate to the particular complaint” does not mean that the complaint must have been known of or its grounds at least in existence at the time of the agreement. The EAT suggested that the words “the particular complaint” were not apt to describe a potential future complaint (para 25). However in our view these words simply require 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 now being pursued against the respondents.” [para 31]
They went on to set out various principles from case law before endorsing the decision of the EAT and Court of Appeal in Hilton UK Hotels Ltd v McNaughton [2005] UKEAT 0059. As a reminder these are:
- A blanket agreement simply signing away all of an employee’s tribunal rights will not do;
- The actual or potential claim must at least be identified by a generic description or by reference to the statutory section giving rise to the claim; and
- If the wording is plain and unequivocal a future claim of which an employee can have no knowledge can be compromised.
Now is a good time to review all template settlement agreements to make sure:
(a) that the various different employment related claims are captured in the tradition list of claims being compromised;
(b) if future claims are intended to be covered it is important that that is unequivocally stated; and
(c) for claimants who do not wish to settle future claims (perhaps because a bonus is yet to be determined or an ongoing grievance appeal or outcome etc.) it will be important to expressly exclude any such potential claim from the scope of the settlement.
