07/11/2022

Compromise Agreements: Can future claims be included that have not yet arisen and are not yet known about?

We are often asked if future claims, that have not yet arisen and are not yet known about, can be settled in a Compromise Agreement (known as Settlement Agreements in GB).

Compromise Agreement is one of two ways in which a binding agreement can be reached so as to preclude that person being able to bring a claim in the Tribunal. The other way is through a Conciliated Agreement (either employer led of early conciliations processes) with the Labour Relations Agency.

It is well established that Settlement Agreements must not contain boiler plate clauses that is standardized text that is used over again without making major changes to the original. Instead, the Agreements must be tailored to the circumstances in question and relate to the particular complaints that can be brought by the employee. This differs from binding agreements through the Labour Relations Agency which can be wide reaching and contain standard terms.

This recent GB Employment Appeals Tribunal case of in Bathgate v Technip [2022] EAT 155 Bathgate v Technip [2022] EAT 155 held that Settlement Agreements cannot preclude future discrimination claims.

FACTS:

B took voluntary redundancy in January 2017, signed an Agreement that included a settlement of all claims including those for age discrimination that had not yet arisen and could not be known about.

That Settlement Agreement provided for payment of an enhanced redundancy, notice payment, payable with his final salary, and an additional sum which would be paid in June 2017.

After signing, the Company then decided that (given the terms of an old Collective Agreement governing how the additional sum was to be paid) B was not entitled to the additional sum as he was over 60 years old.

B brought an age discrimination claim and the Company argued that he had signed away his right to bring an age claim.

EAT HELD:

In considering his case the EAT asked if he had signed away his right to bring that claim and found that he had not stating:

“The inclusion of a claim in a [settlement] agreement defined merely by reference to its legal character or its section number does not satisfy the language of [the Equality Act]. The words ‘the particular complaint’ suggest that Parliament anticipated the existence of an actual complaint or circumstances where the grounds for a complaint existed. I do not consider that the words ‘the particular complaint’ are apt to describe a potential future complaint.”

Therefore, the EAT Judgment held that a ‘particular complaint’ could never relate to a cause of action that had not emerged at the time of the agreement.

In coming to that view, it found that ‘particular complaint was one that [must have] had already arisen between the parties.’

COMMENTARY

This case goes much further than the case of Royal National Orthopaedic Hospital Trust v Howard [2002] IRLR 849 which considered the extent to which a waiver could potentially cover future claims.

Royal National Orthopaedic Hospital had held that it was still possible to compromise future claims, which parties had no knowledge of, whether in existence or the future. Royal National Orthopaedic Hospital stated that to compromise such claims then the Agreement must be absolutely clear and leave no room for doubt that it is doing that. This case limits that dramatically by interpreting the words ‘the particular complaint’ to relate to the precise facts that have occurred.

It also differs from Arvunescu v Quick Release (Automotive) Ltd [2022] EAT 26. There the EAT found that a binding Agreement via ACAS (equivalent to LRA) can, if the wording is sufficiently clear and wide enough, cover a future claim brought after the COT3 had been signed. The wording in that agreement had stated: “of any kind whatsoever, wheresoever and howsoever arising…. [and which arose]…directly or indirectly out of or in connection with the claimant’s employment with the respondent, its termination or otherwise”. It also contained clause making it clear “even though the claimant may be unaware at the date of this agreement of the circumstances which might give rise to it or the legal basis for such a claim”.   We will have to wait and see if this approach is also applied to LRA Agreements and there is a possibility that there will be an appeal in this case to the GB Court of Appeal. But perhaps this is another reason for recommending the use of a LRA Binding Agreement over a Compromise Agreement given that the later might potentially be able to settlement future claims.