Waiving goodbye to future claims

Settlement agreements are a useful mechanism for facilitating an employee’s exit from a company. In return for payment, an employee agrees to waive all rights to bring any claims against an employer, usually in a ‘full and final settlement’.

A settlement agreement must include the list of claims being waived under the agreement and this is often widely drafted to include future claims, regardless of whether such claims were in the contemplation of the parties at the date of the agreement.

In this article we explore whether future claims can be waived under a settlement agreement following the recent decision in Clifford v IBM United Kingdom Ltd.

Clifford v IBM United Kingdom Ltd

The claimant worked for IBM and was continuously absent due to illness from 2008. In 2012 he raised a grievance due to IBM’s failure to put him onto its employee disability plan. The grievance was settled under a settlement agreement in 2013. Under the agreement, the claimant waived his right to bring claims (including for disability discrimination) and was transferred to IBM’s disability plan. The agreement did not waive future claims, given that the employment was ongoing (if inactive), but it did waive future claims related to the grievance or events relating to his transfer to the disability plan.

In 2022, the claimant made a claim against IBM for disability discrimination because since his transfer to the disability plan, he did not receive a salary review (which was discretionary under the disability plan) and he continued to receive a reduced rate salary compared to other employees, who were not on the disability plan. The Employment Tribunal considered that the claimant’s claim fell within the list of claims waived under the settlement agreement.

The Employment Appeal Tribunal (EAT) consulted the recent Scottish decision in Bathgate v Technip Singapore PTE Ltd which held that future claims could be waived under a settlement agreement, even if such claims were unknown to an employee at the time of signing the agreement. For further background on this case, please see our case study here.

The only difference in these two cases, as highlighted by the EAT, was that Mr Clifford was still in employment, albeit his was ‘inactive’ and only continuing so he could receive benefits under the disability plan, whereas the claimant in the Bathgate case was not employed at the time a claim was made. This difference alone was not substantive and so the EAT concluded that because the settlement agreement precluded the claim, it was struck out.

This case clarifies that future claims which are not known at the date of signing can be waived under a settlement agreement.

Key takeaways for employers

While a settlement agreement can waive future claims against employers relating to events unknown at the time of signing the agreement, care must be taken to ensure that the agreement terms and claims to be waived, are drafted clearly and with reference to the correct statutory references.  For future claims to be waived the agreement must be “absolutely plain and unequivocal” about this.

This case might suggest that future claims can be waived where the employee remains in employment.  We would be cautious about such an interpretation.  This was a rare situation where the employee was in employment but inactive.  And the waiver of future claims was specific to matters relating to the grievance and transfer to the disability plan.   Where an employee remains in active employment, it would be surprising if an employee could validly waive all future rights against the employer under a settlement agreement.

We have expertise in drafting settlement agreements for employers. If you have any questions about settlement agreements, please contact a member of our Employment team.