United Kingdom: Settlement agreement did not cover an unknown, future age discrimination claim

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 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.

Earlier case law had suggested that it is possible to settle future statutory 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.

The EAT also expressed the view that clauses which list "a variety of possible claims by reference to their nature or section number" are no different from a general waiver clauses and will not be effective. Its opinion on this point was not binding and previous cases have suggested that such clauses could be effective, even though they were not best practice.

On the face of it, this judgment means that a settlement agreement will not be effective to settle future statutory claims before their existence is known. However, it should be noted that this case concerned events that had not yet occurred. It does not determine the position in relation to settlement of claims which have already arisen, even if the claimant does not yet realise. The position there may be addressed in future litigation.

The case highlights the difficulty in guaranteeing an entirely clean break under a settlement agreement. The EAT recognises that its decision might be inconvenient where the parties wished to avoid future claims and end an employment relationship permanently, but considered that the legislation prevents that. In practical terms, when an employer is entering a settlement agreement significantly in advance of the termination of employment or 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. Given the conflicting case law, it is unlikely that the practice of including long lists of possible claims will end, although there may be an increased focus on tailoring the list and ensuring the most likely claims are separately identified. In some cases it may also be worth settling claims with the involvement of ACAS under a COT3 agreement. ACAS settlements do not have to relate to "particular proceedings" and so may give scope for a wider waiver. 

Contact Information
Kim Sartin
Partner at BakerMcKenzie
Read my Bio
Jonathan Tuck
Partner at BakerMcKenzie
Read my Bio
James Brown
Knowledge Lawyer at BakerMcKenzie

Copyright © 2023 Baker & McKenzie. All rights reserved. Ownership: This documentation and content (Content) is a proprietary resource owned exclusively by Baker McKenzie (meaning Baker & McKenzie International and its member firms). The Content is protected under international copyright conventions. Use of this Content does not of itself create a contractual relationship, nor any attorney/client relationship, between Baker McKenzie and any person. Non-reliance and exclusion: All Content is for informational purposes only and may not reflect the most current legal and regulatory developments. All summaries of the laws, regulations and practice are subject to change. The Content is not offered as legal or professional advice for any specific matter. It is not intended to be a substitute for reference to (and compliance with) the detailed provisions of applicable laws, rules, regulations or forms. Legal advice should always be sought before taking any action or refraining from taking any action based on any Content. Baker McKenzie and the editors and the contributing authors do not guarantee the accuracy of the Content and expressly disclaim any and all liability to any person in respect of the consequences of anything done or permitted to be done or omitted to be done wholly or partly in reliance upon the whole or any part of the Content. The Content may contain links to external websites and external websites may link to the Content. Baker McKenzie is not responsible for the content or operation of any such external sites and disclaims all liability, howsoever occurring, in respect of the content or operation of any such external websites. Attorney Advertising: This Content may qualify as “Attorney Advertising” requiring notice in some jurisdictions. To the extent that this Content may qualify as Attorney Advertising, PRIOR RESULTS DO NOT GUARANTEE A SIMILAR OUTCOME. Reproduction: Reproduction of reasonable portions of the Content is permitted provided that (i) such reproductions are made available free of charge and for non-commercial purposes, (ii) such reproductions are properly attributed to Baker McKenzie, (iii) the portion of the Content being reproduced is not altered or made available in a manner that modifies the Content or presents the Content being reproduced in a false light and (iv) notice is made to the disclaimers included on the Content. The permission to re-copy does not allow for incorporation of any substantial portion of the Content in any work or publication, whether in hard copy, electronic or any other form or for commercial purposes.