EAT confirms the requirements for effectively settling future claims in a settlement agreement

The Background

Mr Clifford (‘the Claimant’) had been employed by IBM UK Ltd (‘the Respondent’) from July 2001, following a TUPE transfer which provided him continuous service from 2000. From 19 September 2008, he has been continuously absent due to ill-health. In 2012, he raised a grievance regarding deductions from his salary, not receiving a salary increase since he became absent in 2008, not having received holiday pay and a failure by the Respondent to transfer him on to their dedicated Disability Plan. His grievance was investigated, heard and appealed and subsequently, the Respondent moved Mr Clifford on to their Disability Plan and the parties entered into a compromised agreement.

The compromised agreement, set against the backdrop of the grievance, included a waiver of current and future claims relating to unlawful deductions from wages, breach of contract, disability discrimination and ‘other claims referred to in the Grievance and Appeal’.

The Claimant later brough claims to the Employment Tribunal (ET) in February 2022, complaining of discrimination arising from a disability, direct discrimination, indirect discrimination, unlawful deductions from wages and holiday pay owed under the Working Time Regulations.

The ET struck out the claims on the basis that it did not have the jurisdiction to hear them, as they had been waived by the Claimant under the compromise agreement and they had no reasonable prospects of success.

The Claimant appealed this decision to the EAT, who upheld the original decision by the ET, confirming that the claims had been precluded by the compromise agreement and even taking the Claimant’s case at it’s highest, the discrimination claims had no reasonable prospects of success.

The Legal Framework

S144 of the Equality Act 2010 initially provides that contracts between persons would be unenforceable if it operates to exclude or limit a provision of the Equality Act in favour of one party. For example, a contract of employment cannot contain a clause stating that the employee would never be able to bring a claim against the employer for breach or omission of the rights vested upon the employee from the Equality Act. In short, it stops people from actively being able to waive their rights to bring claims on a regular basis. However, s144 does go on to offer an exception to the rule, where there is a contract that settles a complaint. This is only if the contract is made with the assistance of a conciliation officer or is a qualifying agreement. This is where we see settlement agreements being made either by parties directly during or after employment, or by way of a COT3 with the assistance of ACAS. Both are typically done where there is contemplation of litigation or risk of a claim being made.

What is a qualifying settlement agreement?

The Equality Act 2010 helpfully sets out a number of requirements a qualifying settlement agreement must contain in order to be afforded the exception to the rule in s144. Some of these requirements (not exhaustive) are that it is in writing, the complainant has received advice from an independent advisor about its terms and effect and that the contract relates to the particular complaint which the claims are to be waived regarding.

In the present case, there was no dispute that the agreement between the parties constituted a qualifying settlement agreement.

Compromise agreements between parties following negotiations and suitable independent legal advice can include a waiver of claims that may or not be known to either party at the time of signing. This is a long-standing principle and precedent where compromise and settlement agreements are concerned. It is also known and considered by judges when deciding upon enforceability, where there is a lack of clear language a tribunal or court will be more hesitant to confirm that a party intended to waive rights they could not or were not aware of at the time of signing. As such, the wording of the settlement agreement was crucial here. Within the agreement, there was a clear narrative of the circumstances that had led the parties to reaching agreement including the grievance and appeal. It specifically set out to ensure the Claimant was waived of the rights to bring current or future claims on the matters dealt with as part of the grievance, appeal and subsequent agreement.

The Impact

The ET and EAT did give consideration to the wider public policy implications of settlement agreements and the ability to waive all future claims. There was a discussion of what this could mean for sexual harassment claims, would signing an agreement at one stage result in an employee being silenced forever? This would of course be contradictory to public policy and should not be the intention of such agreements. Taking account of the authorities placed before the EAT and parliamentary intention, the purpose of the provision in s144 of the Equality Act 2010 is to protect claimants from the danger of signing away their rights without a proper understanding of what they are doing.’ The provision was not designed so to prevent any waiver of future claims and in doing so, any agreement must be precise as to what claims the waiver applies by way of the statute or a description of the circumstances. It was upheld that the claims brought by the Claimant now related to or formed part what the initial grievance was about and/or the transfer made to the Disability Plan. There was no reason for the ET or EAT to stray from the general principle that based upon the clear wording of the agreement there was an intention and understanding that future claims would be waived.

Regardless, the ET and EAT did also consider the basis of the claims made and asserted that they were without reasonable prospects of success which also entitled the ET to strike out on that basis.

What does this mean for you?

The decision in Clifford v IBM UK Ltd is not the first case we have seen concerned with the interpretation and powers of settlement agreements and it is highly unlikely that it will be the last. Such other cases, like Bathgate v Technip, have been brought to our attention in most recent years to asses the effectiveness of using settlement agreements to waive current and future claims. From the outcomes of Bathgate and Clifford, so far we can be content that there remains the ability to waive future claims within an agreement, if it is properly constructed.

For organisations with cases that may arise with the need to enter into an agreement regarding a current complaint, you will want to ensure that where possible, you retain the ability to waive future claims with a properly constructed agreement. Failure to do so could meant that claims could still be successful in the future even when you think the dust has settled. For peace of mind, contact your trusted advisors at Weightmans for advice, guidance and support drafting settlement agreements which incorporate a waiver of related future claims.

For individuals, we can offer support and assistance reviewing and advising you on the terms of a proposed settlement agreement and what it may mean for you and future claims, whether in your contemplation or not.