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An important decision which underscores the importance of precise drafting in settlement agreements and the need for employees to fully understand the long-term implications of their waivers.
27 June 2024
Case Study
Could a settlement agreement signed in 2012 stop an employee from bringing a discrimination claim in 2022? In a judgment handed down in June 2024, the Employment Appeal Tribunal (EAT) held that it could.
Mr Clifford worked for IBM but had been absent from work due to his ill health since 2008. In 2012, Mr Clifford raised a grievance which referred to a number of complaints, including IBM’s failure at that time to move him to its disability plan.
As part of the resolution to his grievance, Mr Clifford was moved to the disability plan and received disability salary payments at a specified level (namely, £72,037.44 per year). The agreement was recorded in a compromise agreement in 2013, on which Mr Clifford received independent legal advice on the terms of that agreement.
In the compromise agreement, Mr Clifford waived all claims, regardless of whether he knew about them at the time of the agreement. This waiver did not extend to claims that arose after the date of the agreement but only to the extent that any such claims are unrelated to Mr Clifford’s grievance or transfer to the disability plan.
In 2022, Mr Clifford brought a claim to the Employment Tribunal (ET). He argued that a lack of annual salary reviews or salary increases, which he would have received if he were still in work, amounted to discrimination.
Case Study
In its response, IBM said that the ET didn’t have jurisdiction to hear Mr Clifford’s claims because they were within the scope of the compromise agreement.
The ET agreed with IBM. In deciding that Mr Clifford was not able to continue with his claims, it distinguished between waiving future claims for sexual harassment (which might leave a claimant to suffer harassment without remedy) and future claims related to an agreed holiday pay calculation (where the claimant would or should have been aware of the terms of the agreement and its consequences, even if it might not have predicted the circumstances that could give rise to a claim in the future). Consequently, Mr. Clifford’s claims were not allowed to proceed.
Mr Clifford appealed, but his appeal was dismissed by the EAT. It held that there was nothing in the law which meant that future claims could not be settled provided that appropriately clear language is used. In particular, the EAT said that the relevant law does not restrict the kinds of claims which can be settled, but rather how they must be settled.
The important factor in Mr Clifford’s case is that the waiver was not a ‘blanket waiver’ and only applied to claims related to his grievance and his move to the disability plan. It was therefore specific enough to meet the legal test (i.e., that it relates to “the particular complaint*”).
Employers should take some comfort in the fact that, where they agree a long-term arrangement with an employee as part of a settlement agreement, claims arising from that arrangement can be validly waived, even if the circumstances giving rise to those claims haven’t happened yet. However, securing that waiver will require careful drafting to ensure it is specific enough.
Employees (and their advisers) should read the wording of the waiver carefully and think critically about the lasting effect of any agreement and what issues might arise in the future. For example, in Mr Clifford’s case, he or his adviser could have negotiated regular salary reviews, or they could have negotiated to restrict the waiver to only those claims that had arisen at the time the agreement was entered into.
*It is a legal requirement that a valid settlement agreement relates to “the particular complaint,” i.e., the claims the parties had in mind at the time they signed it. This means that the claims being given up must be clearly identified in the agreement.
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