In October 2022 the Employment Appeal Tribunal (EAT) in Bathgate v Technip helped to clarify an important point of law regarding the settlement of unknown future claims under the Equality Act 2010: specifically, finding that unknown future discrimination claims cannot be settled by a settlement agreement.
Here, we explain the case of Bathgate v Technip in detail and consider how far a settlement agreement can go when it comes to guarding against future litigation.
What happened?
Mr. Bathgate was employed by Technip, a ship operator, until he agreed to accept redundancy terms in January 2017 at the age of 61. In order to receive the enhanced redundancy terms, he was required to sign a settlement agreement.
Under that settlement agreement, Mr. Bathgate was entitled to payments including his enhanced redundancy pay, notice pay, and an additional sum which was yet to be determined. That additional sum was a pension payment, calculated by reference to a separate collective agreement between the National Maritime Agency and Nautilus Trade Union.
The collective agreement stated that this payment would only apply to officers who had not reached the age of 61. Mr. Bathgate signed the settlement agreement in the belief that he would receive the pension payment. However, shortly afterwards, Technip decided not to pay the sum to employees who were 61 or over at the time of their dismissal. In response, Mr. Bathgate commenced a claim of age discrimination against Technip.
What was the claim about?
Technip accepted that the decision not to pay the additional payment was based on age. However, the real points of contention were whether Mr. Bathgate was already precluded by his settlement agreement (which is the focus of this article) and if not, whether the Equality Act 2010 applied to Mr. Bathgate by virtue of the fact that he was a seafarer.
Who won?
Initially, Mr. Bathgate was unsuccessful as the Employment Tribunal found that the settlement agreement had settled all claims, whether past, present or future. However, on Mr. Bathgate’s appeal, the EAT held that this was an error in law.
Unfortunately for Mr. Bathgate, the EAT also found that even though his settlement agreement did not preclude the claim in principle, other provisions of the Equality Act 2010 meant he could not pursue an age discrimination claim because he was a “seafarer” in his employment with Technip UK.
What have we learned?
Settlement agreements are commonly used by employers to terminate employment without any risk of litigation. The employee typically agrees to waive their statutory and contractual rights. In return, the employer typically agrees to terms which would not otherwise apply, such as, for example, a termination payment.
We regularly see settlement agreements which incorporate another agreement or document by cross-reference, such as a Share Scheme. This essentially reserves some entitlement which, if the specific conditions later apply to the individual, will be honoured in addition to the settlement agreement terms.
We also regularly see drafting in settlement agreements seeking to settle not only existing claims, but also claims which might arise in the future. What we saw in Bathgate v Technip UK Ltd was a potentially discriminatory decision by Technip regarding the conditions for payments due under the collective agreement. That potentially discriminatory decision was made after the settlement agreement was entered in, however, and therefore ‘in the future’.
What the EAT judgment has clarified is that Equality Act claims, such as age discrimination, which have not yet arisen when the settlement agreement is entered into, will not be covered by the settlement agreement waiver.
What does that mean for the future?
Settlement agreements will need to be closely checked for the scope of claims they apply to and, as per Bathgate, future discrimination claims are clearly capable of being litigated if they arise after the binding contract is made.
However, individuals who find themselves in a similar situation to Mr. Bathgate should carefully check the whole settlement agreement for other contractual terms which might impose harmful consequences of future litigation. There may be financial penalties or indemnity provisions on the individual to their ex-employer if they pursue a claim, which not only cover the compensation but also their ex-employer's costs and expenses.
The question is likely to be whether those adverse consequences apply to any litigation, or only to the claims to which the settlement agreement applies. We would recommend seeking legal advice on the particular terms before commencing any litigation.
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This information is intended for general information purposes only and should not be used as a substitute for professional advice. Howells Legal Limited accept no responsibility for any direct or indirect result arising from any reliance placed on it, including any loss.
