There are two different ways that employment disputes can be effectively and validly settled:
- by using an Acas COT3 agreement; or
- by signing a settlement agreement complying with the legal requirements for these documents detailed in s203 Employment Rights Act 1996.
It had been clear since the case of Arvunescu v Quick Release (Automotive) Ltd that COT3 agreements could be used to settle future unknown claims – claims arising after the agreement had been signed. Following recent decisions of the Court of Session (Bathgate v Technip) and the Employment Appeal Tribunal (Clifford v IBM), it is now clear that future unknown claims can also be settled using a settlement agreement – so long as the types of claim are clearly identified and the wording in the agreement covers the relevant claim.
These cases provide welcome clarity. In Clifford v IBM the relevant clause prevented Mr Clifford from bringing a new claim even where he had remained in employment following the initial settlement. He had signed a settlement agreement which settled all claims and agreed to move onto a ‘retirement plan’. Increases in salary under the plan were discretionary. When he failed to receive any increase over a number of years he claimed disability discrimination. The Employment Appeal Tribunal held that he was unable to pursue his claim – any claim of discrimination (including a future claim which had not yet arisen) had been validly settled under the wording of the settlement agreement.
The issue has been ‘in the news’ again recently after a quartet of BBC newsreaders launched an appeal against an employment tribunal’s decision to strike-out their equal pay claims against the BBC because of previously signed settlement agreements which were drafted to cover future claims. The journalists brought an equal pay claim contending that the BBC’s pay practices were discriminatory back in 2019. These claims were settled in 2020 and all four signed settlement agreements. The same journalists recently issued new equal pay claims, arguing that the 2020 settlements only dealt with historic pay disparity and that a disparity still exists. The tribunal struck out this aspect of their claims in May on the basis that the fresh claims arose from the same facts and cause of action as the previous, settled proceedings. The journalists, appealing this decision, are arguing that the 2020 settlements addressed past discrimination only and should not prevent them from challenging alleged discriminatory pay practices since 2020. Much will likely depend on the terms of the settlement agreements signed. There is also the potential issue that these were claims which the parties ought to have been aware of at the time of signing the 2020 settlements – after all they were employed by the BBC at the time – making it (arguably) a ‘known’ future claim rather than an ‘unknown’ one.
The case has echoes of the case of Ajaz v Homerton. In this case, the Claimant settled a claim of detriment on grounds of whistleblowing through Acas using a COT3 agreement. The COT3 included an undertaking by the Claimant not to reactivate the issues/complaints in the proceedings. One of the issues in the proceedings was whether or not the Claimant’s disclosures were protected disclosures. Several years later the Claimant brought a further claim of whistleblowing detriment. She said the new detriments arose from the same original disclosures. The Employment Appeal Tribunal held that she was not able to pursue this claim. The COT3 prevented her from re-litigating the ‘issue’ of whether she had made protected disclosures.
Whilst the BBC journalists will not know the outcome of their appeal for several months, HR can take the following points from this expanding line of case law now:
- Both settlement agreements and COT3 agreements can effectively settle future unknown claims against the same employer.
- This is the case even if the employee remains employed following the original settlement (as was the case in Clifford and is the case for the BBC journalists).
- COT3 agreements can go further than settlement agreements and, if appropriately drafted, settle ‘issues’ as well as actual claims.
- Clear drafting is exceptionally important. The Court of Session in Bathgate held: “a future claim of which an employee does not and could not have knowledge may be covered by a waiver [in a settlement agreement] where it is plain and unequivocal that this was intended”.