The question of whether future claims can be waived in a settlement agreement has been a contentious issue in UK employment law. Recent case law has provided clarity on this matter. The Employment Appeal Tribunal (EAT) in the case of Clifford v IBM United Kingdom Ltd confirmed that future claims can indeed be waived, provided the settlement agreement is drafted with clear, precise, and unequivocal language. This decision aligns with the earlier ruling in Bathgate v Technip Singapore PTE Ltd by the Scottish Court of Session, which held that unknown future claims could be waived if they are clearly identified in the agreement.
Statutory requirements
Under Section 147 of the Equality Act 2010, a settlement agreement must relate to a "particular complaint" to be binding. This requirement aims to protect employees from signing away significant employment rights without a proper understanding of what they are doing. The EAT has emphasized that the agreement must specifically identify the types of future claims being waived, either by a generic description (e.g., "unfair dismissal") or by referencing the relevant statutory provision.
Practical implications for employers
Drafting effective settlement agreements
To ensure that a settlement agreement effectively waives future claims, employers must:
Use clear and specific language: The agreement must explicitly state the types of future claims being waived. General waivers of "all claims" are insufficient and likely unenforceable.
Include statutory references: Where possible, include references to the specific sections of the relevant statutes. This helps in meeting the requirement of relating to a "particular complaint".
Seek legal advice: Given the complexities involved, it is advisable to seek legal advice to ensure that the settlement agreement is drafted correctly and meets all statutory requirements.
Continuous employment considerations
The enforceability of future claims waivers in ongoing employment scenarios has also been addressed. The EAT in Clifford v IBM United Kingdom Ltd clarified that continuous employment does not necessarily invalidate a future claims waiver, provided the agreement is clear and specific. This offers employers some comfort when negotiating settlements with employees who will remain in employment after signing the agreement.
Additional considerations
Limitations and exclusions
Certain types of claims cannot be waived under a settlement agreement. These include:
Statutory claims: Claims under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA), and the Agency Workers’ Regulations 2010 (AWR).
Pensions and personal injury claims: Claims related to accrued pension rights and future personal injury claims that are unknown at the time of signing cannot be waived.
Mechanisms to bolster protection
Employers may consider additional mechanisms to strengthen the enforceability of settlement agreements, such as:
Reaffirmation letters: These can be used where there is a significant gap between signing the agreement and the termination of employment. The employee reaffirms the waivers and warranties in the agreement shortly before termination.
Clawback provisions: Including clauses that allow the employer to reclaim payments if the employee breaches the agreement or brings a claim.
The ability to waive future claims in a settlement agreement is now well-supported by case law, provided the agreement is drafted with clear, specific, and unequivocal language. Employers should ensure compliance with statutory requirements and seek legal advice to mitigate risks and enhance the enforceability of such waivers.
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