Key takeaways

• This is a welcome decision as it confirms that a clean break under a settlement agreement is possible provided the types of claims it is waiving are clearly identified and the wording in the settlement agreement is plain and unequivocal.
• The Court agreed with earlier case law that a blanket waiver of all statutory claims will not be sufficient; the claims being waived must at least be identified by a generic description or a reference to the section of the statute giving rise to the claim. We would continue to recommend including a separate, tailored list of the most likely claims in the settlement agreement, but this decision suggests that the practice of including a catch all with a longer list of possible claims may also be effective.
• As this is a decision of the Court of Session, it is not binding on courts in England and Wales. However, decisions of the Court of Session are highly persuasive and the legislation being interpreted is the same in England and Wales as in Scotland. However, the position in relation to waiver of future claims may still be revisited by the Court of Appeal or Supreme Court and so, whilst reassuring for employers, this decision might not be the final word on the issue.
• Where there is a gap between signing the agreement and termination of employment, we would still recommend requiring re-execution at termination to ensure that any claims that arise during that gap are properly waived.

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 which were not known and had not yet arisen. This was because of the statutory requirement that settlement agreements must relate to the "particular proceedings" being settled.

The Court of Session has now overturned the EAT's decision. The court considered that had it been Parliament's intention to limit the parties' freedom of contract, it would have made that clear in the legislation. Future claims can be waived so long as the types of claims are clearly identified and the objective meaning of the words used is such as to encompass settlement of the relevant claim. Age discrimination claims, present and future, were clearly particularised in this case and therefore properly waived under the settlement agreement.

For advice or to discuss what this means for you and your business, please get in touch with your usual Baker McKenzie contact.