An unsettling conclusion?

Advice  |   22 January 2024

Written by
Julian Munroe, Associate Solicitor

A Settlement Agreement is a legally binding contract made between an employer and an employee often used to resolve an on-going workplace dispute or to end an employment relationship on agreed terms.

Under the terms of a Settlement Agreement, an employee will waive their individual legal rights (contractual and statutory) to bring a claim in an Employment Tribunal or Court against their employer in return for a termination payment (which may include notice pay, redundancy pay, an ex-gratia payment and other sums.)

Until recently the established legal position was that settlement agreements could not settle future employment claims that had not yet arisen – however this position has changed following the recent judgment of the Court of Session (“CoS”) in the case of Bathgate v Technip UK Limited.

Case Facts

In the case of Bathgate the Claimant had accepted an offer of voluntary redundancy from his employer and left his employment under a settlement agreement. After the settlement agreement had been signed, the Respondent decided that it was not going to make a particular type of pension payment to its employees that were over 60. The Claimant was over 60 at the time and did not qualify for this payment and subsequently made a claim of age discrimination.

The Employment Tribunal (“ET”) held that Claimant’s age discrimination claim had been settled by the settlement agreement, even though the alleged age discrimination only occurred after the settlement agreement had been signed.

The Claimant appealed the ET’s decision in the Employment Appeal Tribunal (“EAT”). The EAT disagreed with the ET and held that settlement agreements could not settle future claims for matters that had not arisen at the date of the agreement.

The employer contested the EAT’s decision and lodged an appeal to the Court of Session.

The CoS, overturning the EAT’s judgment, held that the employee’s age discrimination claim had been validly settled by the settlement agreement – establishing that consequently settlement agreements can settle future employment claims.

Although an objectively harsh decision against Mr Bathgate, who had undoubtedly been treated less favourably on account of his age, the CoS highlighted that “however unpalatable it may be to conclude that any form of discrimination was therefore permissible, moral justification in this context does not always give rise to legal remedy”.

Impact of the decision

This ruling will be welcomely received by employers and will afford them a greater degree of confidence that agreements are able to achieve a decisive conclusion to working disputes with employees. This will be beneficial for employers looking to achieve a clean break and will reduce the risk of them being issued with Employment Tribunal claims from former employees.

Despite the ruling there remain a number of requirements and stipulations that a settlement agreement must adhere to in order for it to be legally enforceable. The judgment confirms a settlement agreement will only settle future claims provided the types of claim in question is clearly identified and is covered by the wording in the agreement. It is therefore extremely important and advisable that an experienced legal advisor review the terms within any agreement ensuring that the terms are carefully drafted so that the agreement is valid and enforceable.

How Thackray Williams can help

Thackray Williams is vastly experienced in advising both employers and employees on settlement agreements in relation to all types of work disputes. Our experts are able to clearly explain the impact of all terms of an agreement and effectively advocate on our clients’ behalf to secure favourable outcomes.

If you require legal support with a settlement agreement please contact our Employment Team on 020 8290 0440.

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