Can Future Claims Be Settled When Employment Continues?
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Understanding the Scope of Settlement Agreements in Employment Law
Sme cases stand out due to their broader implications. One such case is the recent decision by the Inner House of the Scottish Court of Session regarding the settlement of future equality claims within ongoing employment relationships. This development is particularly significant for both employers and employees navigating settlement agreements and disability claims.
Key Case: Bathgate -v- Technip Singapore PTE Ltd
Earlier this year, the Inner House of the Scottish Court of Session held that a settlement agreement could resolve an equality claim that had not yet arisen at the time the agreement was signed. The case in question, Bathgate -v- Technip Singapore PTE Ltd [2023] CSIH 48, established that future claims could indeed be settled, providing a precedent for ongoing employment relationships.
Ongoing Employment and Future Claims
Recently, the Employment Appeal Tribunal (EAT) considered whether this principle could apply if the employment relationship continued beyond the point of settlement. The case involved an employee, C, who had been off work due to ill health for several years. In 2012, C raised a grievance about not being transferred to the employer’s disability plan. A settlement agreement was negotiated in April 2013, which included provisions for C's transfer to the disability plan. In exchange, C waived his right to bring various specified claims, including disability discrimination, regardless of whether these claims were contemplated at the time of the agreement.
The Nuances of the Settlement Agreement
The agreement included an exception for future claims, but it was worded such that it did not apply to matters connected to C's grievance or arising from his transfer to the disability plan. Several years later, C brought disability discrimination claims, arguing that his salary had not been increased due to the lack of annual reviews, and he received annual leave pay at a reduced rate compared to other employees.
Tribunal’s Decision and Appeal Outcome
The employment tribunal struck out C’s claims, stating they had no prospects of success due to the 2013 settlement agreement. C’s appeal was dismissed by the EAT, which applied the Bathgate decision. The EAT acknowledged that although C remained an ‘inactive’ employee to receive benefits under the disability plan, this distinction did not affect the settlement agreement’s validity. Thus, the tribunal was entitled to strike out C’s claims.
Implications for Employers
While this case centers on the scope of settlement agreements, it underscores an important message for employers offering permanent health insurance, income protection, or similar benefits. Typically, settlement agreements are not entered when an employee becomes eligible for these benefits. Therefore, employers should review the wording of any contract clauses, policies, and letters to staff to ensure clarity on whether payments will increase over time due to future pay rises. This clarity, while not preventing potential disability discrimination claims, may deter such claims from ‘inactive’ employees.
Clifford -v- IBM UK Ltd [2024] EAT 90
In summary, the recent rulings highlight the importance of clear and precise settlement agreements and contractual terms, especially regarding future claims and ongoing employment. Employers must remain vigilant and proactive in drafting agreements to mitigate potential legal challenges effectively.
Read the full judgement here.
