The recent Employment Appeal Tribunal has made a decision which states that employees cannot settle any future statutory claims if they have not arisen at the date of the settlement agreement. This means that parties entering into these agreements need to understand this new decision and how it affects them.

For a settlement agreement to be considered valid, it has to comply with statutory requirements. Employees must receive independent legal advice on the terms of the agreement and how it affects them. The settlement agreement must also refer to complaints and proceedings that are waived. Blanket waivers of claims are not enough, any claims must be identified within the agreement. This ensures that employees do not sign away any rights without having a full understanding of the implications surrounding this.

Up until now, there has been uncertainty relating to whether employees can sign future claims that are not contemplated by both parties when entering a settlement agreement. Prior cases indicated that it was possible to settle future claims, but recently the tribunal stated that claims which are unknown to both parties when signing the settlement agreement cannot be settled.

One case that went to an employment tribunal related to an employee who was made redundant. Once termination had taken place, the parties entered into a settlement agreement which referred to other payments, including an additional payment being made to the employee. This was calculated in terms of a collective agreement. This pre-dated age discrimination legislation and stated payment would only be made to employees under sixty-one years of age.

Ray Crudgington, the Managing Partner at Grant Law Solicitors, said “What was unfortunate in this case is the employee was sixty-one at the time of his dismissal. He automatically expected he would receive this additional payment. A month after the settlement agreement, the employer decided that due to his age, they were not responsible for paying this payment, due to the terms of the settlement agreement. This was argued as age discrimination and brought to the Employment Tribunal”.

Ray Crudgington went on to say, “We always encourage employees that are entering settlement agreements to secure their legal counsel to ensure they fully understand the terms of the agreement before signing, as future claims cannot be considered under the agreement.”

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