Can I sue my employer if I have signed a settlement agreement?

>A settlement agreement in an employment context is a legally binding contract between an employer and an employee. It is typically used to end an employment relationship on agreed terms. It provides a structured and conclusive means for resolving disputes without resorting to a tribunal or court. However what happens if you have signed a settlement agreement and now wish to sue employer?

General Position

A settlement agreement often includes provisions for a severance payment by the employer in exchange for the employee’s agreement not to pursue any claims related to their employment or its termination. To be valid, it must comply with strict requirements. Firstly, it must be in writing. It must relate to specific complaints or proceedings. Furthermore, the employee must have received independent legal advice on the terms and effects of the agreement. This ensures both parties clearly understand the contents of the settlement agreement.

A settlement agreement is intended to be a final resolution between the parties and the breadth of claims covered by settlement agreement is crucial. Often it will include both current and potential future claims that the employee might not yet be aware of. These can extend to statutory claims that haven’t surfaced at the time of the agreement.

However, the legality of waiving such future claims has been debated. Generally, case law suggests that employees can only waive unknown future statutory claims if the settlement agreement explicitly states this intention (referencing Hilton UK Hotels Ltd v McNaughton).

This issue was further clarified by the Court of Session in Bathgate v Technip Singapore PTE Ltd and now most recently in the case of Clifford v IBM.

Case Details

Mr. Bathgate was laid off by Technip. He signed a settlement agreement in January 2017, waiving rights to any claims, including age discrimination. The waiver was comprehensive and covered existing and potential future claims as well.

The settlement agreement also confirmed adherence to the Equality Act 2010’s conditions for a valid settlement, which include addressing specific complaints.

A discrepancy arose over a payment under a collective agreement due to Mr. Bathgate’s age, leading to his age discrimination claim at the Employment Tribunal (ET). The ET upheld the settlement, citing the agreement explicitly covered such a future claim, following the Hilton precedent.

The Employment Tribunal’s Decision

The question before the Employment Tribunal (“ET”) was whether section 147(3)(b) EqA 2010 had prevented the parties from settling Mr Bathgate’s age discrimination claim. Section 147(3)(b) requires a settlement agreement to relate to “the particular complaint”. In other words, it must specify the exact claims that the parties which are signatory to the settlement agreement are intending to settle.  Mr Bathgate argued that a settlement agreement purporting to settle post-settlement claims was not enforceable. The ET disagreed. Following the judgment in Hilton, it found that the settlement agreement did in fact expressly cover Mr Bathgate’s claim, despite the fact that it had not yet arisen at the time of the settlement agreement.

The Employment Appeals Tribunal’s Decision

Mr Bathgate appealed to the EAT, arguing that it was not possible to settle a claim under a settlement agreement before that claim had arisen. Mr Bathgate asserted that the legislation precluded the settlement of his claim, and referred to an extract from Hansard, in which Viscount Ullswater, when referring to the Employment Rights Act 1996’ equivalent provision at s.203(3), said: “these procedures should only be available in the context of an agreement which settles a particular complaint that has already arisen between the parties to that complaint”. Mr Bathgate stated it was clear from this that Parliament did not intend the legislation on settlement agreements to cover the settlement of future unknown statutory claims.

The EAT concluded that, regardless of the intention of the parties, s.147(3)(b) EqA 2010 did not allow future claims to be waived.

The Court of Session’s Decision

Employer appealed this point to the Court of Session. It argued that an unknown future statutory claim may be settled by a waiver where the intention of the parties is plain and unequivocal. It argued that the terms of the settlement agreement between the parties was clear and that therefore Mr Bathgate has settled all the claims, including any future ones.

The employer succeeded. The Court of Session held that provided 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” they could be settled even if at the date of the agreement they have not yet arisen. In this case, it found that the terms of the settlement agreement were sufficiently clear. This meant that Mr Bathgate had settled all the claims by way of the agreement including the future age discrimination claim.

Although this decision was not binding in England and Wales. a general view was that it would be influential in terms of employment tribunal decisions.

This was recently tested in a case of Clifford v IBM. In this case the Employment Appeal Tribunal held that the tribunal had been correct to strike-out the Claimant’s claim of disability discrimination. This was on the basis that it been validly settled by a prior settlement agreement. 

As such future claims can be contracted out of as long as the wording of the settlement agreement is clear, unequivocal and explicitly covers future unknown claims.

This case serves as a reminder of the importance of getting the wording of the settlement agreement right.