Future, unknown claims can be waived under settlement agreements

United Kingdom

A recent decision of the Scottish Court of Session, Bathgate v Technip Singapore PTE Limited, has confirmed that future, unknown claims can be validly waived under a settlement agreement that meets the relevant statutory requirements.   

The facts

The Claimant, Mr Bathgate, was employed by the Respondent, Technip, for 20 years as a Chief Officer and seafarer aboard a number of vessels. In 2016, the Respondent undertook a redundancy exercise to reduce its fleet of Chief Officers. After being placed at risk of redundancy, the Claimant accepted voluntary redundancy in 2017. He entered into a settlement agreement with the Respondent which included enhanced redundancy and notice payments and provision for an additional payment which was to be calculated by reference to a maritime collective agreement. Under the terms of the settlement agreement, the Claimant provided a general waiver of claims that included unknown, future claims and also agreed not to pursue a long list of specific claims which included direct or indirect discrimination on the grounds of age.

However, the terms of the collective agreement only applied to those who had “not attained their 61st birthday” and, following some uncertainty about how to interpret that provision, the Respondent ultimately decided that those over 60 years at the point of redundancy were ineligible for the additional payment. This included the Claimant who was 61 years old at the point of redundancy. The Claimant was notified of the Respondent’s decision, and brought a claim alleging that the decision amounted to post-employment direct and or indirect age discrimination. The Respondent argued that the claim had been validly compromised by the settlement agreement. 

The decisions of the ET and EAT

At first instance, the Employment Tribunal accepted that the waiver in the settlement agreement covered claims whether or not in the contemplation of the parties referring to an earlier decision of the Employment Appeal Tribunal. As required by the relevant legislation, the settlement “related to the particular complaint” in the sense that, although a future claim, it was identified in the agreement in plain and unequivocal terms.

The Claimant appealed to the EAT which held that the legislation did not permit waiver of a future claim and, at the very least, the circumstances giving rise to the claim must have existed at the time of the agreement in order to be validly settled.

Appeal decision

The Respondent appealed that decision to the Scottish Court of Session noting the importance of “finality of litigation” and “clean break” agreements such as that entered into between the Claimant and the Respondent. Overturning the EAT’s decision, the Court of Session held that the requirement that the settlement agreement must “relate to the particular complaint” does not mean that it must have been known of or its grounds at least in existence at the time of the agreement. The words “the particular complaint” simply  require consideration of  whether the complaint being made is or is not covered by the terms of the agreement. They do not bar the waiver of post-employment claims not known about or in existence at the time of settlement. All that matters is whether the claim being waived has been identified which in this case it had. This meant that the jurisdiction of the tribunal was excluded by the settlement agreement, and so the Claimant could not pursue his age discrimination claim.

Practical implications 

This is a helpful decision for employers, making clear that future, unknown claims can be validly waived under a settlement agreement that meets the relevant statutory requirements, provided that they are clearly identified and allowing businesses to achieve “clean break” settlements. It is also a useful reminder that a blanket waiver of claims, such as waiving “all statutory rights”, will be ineffective. While decisions of the Scottish courts are not binding on the courts of England and Wales, decisions at the appellate level are highly persuasive and it is likely to be followed by the lower courts. 

There remains a question mark over whether the Court of Session’s approach in this case would apply to the settlement of future in-employment claims, where there is an ongoing employment relationship and accordingly, no “clean break”. In those circumstances, employers should consider whether other contractual protections are appropriate to deal with this in the settlement agreement.

This article was co-authored by Ellie Harwood, Solicitor Apprentice.