Most settlement agreements are entered into when an employee’s employment is terminating. They are typically used in a redundancy situation or where there is a dispute such as an employee being placed on a performance improvement plan or following a grievance or other disciplinary action. As part of a settlement agreement the employee will agree to waive their rights to pursue claims against the employer usually in return for financial compensation.
The settlement agreement will set out the ‘particular complaint’ that is being settled such as unfair dismissal, discrimination, harassment and victimisation amongst others. It is common for employers to include a long list of claims that are being settled including claims under the data protection act and known personal injury claims. There will usually be a clause setting out what the employee is settling (or waiving). This may include stating that the settlement agreement settles all claims even claims that may arise against the employer in the future.
The Employment Appeal Tribunal case of Clifford v IBM United Kingdom has now provided some guidance in respect of settlement of future claims. In this case, Mr Clifford, entered into a settlement agreement (then known as a compromise agreement) following a prolonged period of sick leave which resulted in him raising a grievance regarding deductions from salary, of not having received pay rises, holiday pay during sickness absence, an assertion of disability discrimination and a request to be placed on under IBM’s ‘Disability Plan’. As part of the settlement agreement Mr Clifford agreed that he would not raise any further grievances or complaints arising out of the matters set out to date or the Disability Plan guidelines.
Mr Clifford then issued an ET1 at the Employment Tribunal for various claims of disability discrimination, unlawful deduction from wages and claims under the Working Time Regulations 1998. Briefly, they were due to him not receiving pay increases and that holiday pay should have been paid at a higher rate. IBM’s position was that many of the allegations were issued out of time but also that the waiver in the compromise agreement expressly referred to these matters, so he was barred from pursuing them.
The EAT agreed with IBM. These complaints formed part of the grievance which was settled via the compromise agreement.
In conclusion, this isn’t a decision which declares that all future claims can be settled, merely that ‘future claims’ are capable of being settled and in this case were capable of being waived because the claims that were issued arose out of the facts of the grievance which led to the compromise agreement and the intention to settle these claims was made clear within the compromise agreement.
This case demonstrates the importance of a settlement agreement being a bespoke document rather than relying upon precedents. Employers should therefore ensure that the intention of the parties is clearly expressed within the settlement agreement and what claims are being settled, and on what basis, are clearly identified rather than just relying upon blanket waivers.
If you require assistance in drafting a settlement agreement or require advice on the terms and effects of a settlement agreement, please Contact Us to see how we can help you.
*This article is a discussion of the current case law and does not constitute legal advice. Specific legal advice should be sought in all cases*
