In brief

A recent EAT decision has held that an employee cannot settle statutory employment claims arising from events that have not yet happened. In doing so, it departed from existing case law that indicated it was possible to settle such claims in some circumstances. We consider that this is an issue ripe for further judicial consideration.

In more detail 

In Bathgate v Technip UK Ltd, the claimant (relevantly, aged 61) had entered into a settlement agreement to settle all claims which he had or may have against Technip. In addition to notice pay and an enhanced redundancy payment, the agreement provided for a further payment calculated by reference to a collective agreement, to be paid at a later date. Subsequently, Technip decided not to make the additional payment, because the collective agreement stated that it was not payable to people who had reached age 61. Mr Bathgate alleged that this was directly age discriminatory.

The question therefore arose whether this claim had been validly settled; the EAT decided that it hadn’t. In short, the EAT concluded that the restrictions on settling statutory employment claims (such as discrimination or unfair dismissal) precluded settlement of claims before their existence was known.

Earlier case law said that it is possible to settle future claims of which an employee does not and could not have knowledge, but that to do so effectively the agreement must be absolutely plain and unequivocal. However, in Bathgate, the EAT said that this was a misreading of other judgments and their factual context, and did not apply to statutory employment claims.

On the face of it, this judgment means that a settlement agreement will not be effective to settle statutory claims before their existence is known. However, it should be noted that this case concerned events that had not yet occurred. Strictly speaking, it does not apply to settlement of claims which have already arisen, even if the claimant does not yet realise. This, combined with the fact that the decision departs from the general understanding of previous case law, means that the issue is ripe for further judicial consideration. With this in mind, we do not consider it necessary to amend precedent settlement agreements in light of this decision. Finally, when an employer is aware that an event could occur following a settlement that might give rise to a claim, it is already common practice to structure the settlement to require re-execution of the agreement after the event in question in order to ensure that you have a valid settlement in relation to that later event.