Background
1. Section 147(2) of the Equality Act 2010 defines a qualifying settlement agreement as one that meets a number of conditions:
a. That it is in writing;
b. That it relates to the particular complaint; and
c. That the Complainant has received advice from an independent advisor about the terms and effects before entering the agreement.
Facts
2. The Claimant was a Chief Officer on various vessels operated by the Respondent. However, in the last 6 months of his long term employment, he was operating on land. The Claimant accepted voluntary redundancy on an enhanced basis, signing a settlement agreement, the terms of which were in full and final settlement of:
“…the Employee’s particular complaints and claims which, however unjustified they may be regarded by the Company, the Employee hereby intimates and asserts against the Company while at the same time acknowledging that they are not to be pursued further, namely, claims (‘Claims’): … (j) for direct or indirect discrimination, harassment or victimisation related to: … (v) age, under section 120 of the Equality Act 2010 and/or regulation 36 of the Employment Equality (Age) Regulations 2006.”
The Agreement also included a general waiver at paragraph 6.1.2 of -
“…. all claims, demands, costs and expenses of whatever nature (whether past, present or future and whether under contract, statute, regulation, pursuant to European Union Law or otherwise) which the employee has or may have against the Company, its directors and employees or any of them or any other Associated Company and/or their directors and/or employees in any jurisdiction arising out of, or in any way connected with, the Employee’s employment with the Company, or the holding of any office with the Company and/or the termination thereof…” (at [12]).
3. The contract provided an additional payment that would only apply to those that had not reached the age of 61. The Claimant was under the impression that he would receive this payment. When he did not, he brought claims for age discrimination.
4. The ET found that the claim could not be brought as it was covered by the settlement agreement between the parties.
EAT Decision
1. The EAT disagreed with the ET on whether the settlement agreement covered the complaint brought. The appeal court did not consider the agreement to be a qualifying settlement agreement under section 147(2) EqA, as it did not to relate to the particular complaint. On proper construction, considering parliaments intention, Lord Summers held that an agreement can only settle an existing complaint that has arisen between the parties. At [25] of the judgment:
The words “the particular complaint” suggest that Parliament anticipated the existence of an actual complaint or circumstances where the grounds for a complaint existed. I do not consider that the words “the particular complaint” are apt to describe a potential future complaint. I accept that language can be used loosely and that ordinarily a complaint might include a potential complaint. But in my opinion the precision of the statutory language excludes this possibility. The Act uses the definite article in combination with the words “particular complaint”.
2. It was held that both lists of types of complaint and potential future complaints were precluded by section 147 EqA. In the same paragraph:
I consider this does not permit clauses that list a series of types of complaint by reference to their nature or section number. It does not seem to me that there is any difference in principle between a “rolled up” waiver and a waiver which lists a variety of possible claims by reference to their nature or section number. Both are general waivers. All that distinguishes them is the particularity with which they have been drafted. I do not consider that one provides any more protection than the other.
3. Lord Summers considered Hilton UK Hotels v McNaughton EATS/0059/04, which concerned a claim brought under the Sex Discrimination Act 1977, in which the words “the particular complaint” appeared in a similar context. In that case, Lady Smith, relying on University of East London v Hinton 2005 ICR 1260, suggests that a potential claim identified by a generic description could be upheld. Following Royal National Orthopaedic Hospital Trust v Howard [2002] IRLR 849, she also expresses the proposition that an employee could settle a claim of which they have no knowledge.
4. Lord Summers distinguishes Hinton in that it did not deal with a hypothetical claim that could arise in the future. In his words, Hinton is authority for the proposition that a known complaint can be settled (at [23]). Equally, he did not consider Howard to be applicable as it did not consider the statutory restrictions imposed by section 147 EqA or its equivalents, but was merely concerned with the law of contract.
5. In spite of this decision, the claim remained struck out, as the Respondent was successful in its cross-appeal. The EAT found that the Claimant was employed as a seafarer and therefore in accordance with section 81 EqA and the Equality Act 2010 (Work on Ships and Hovercraft) Regulations 2011, he did not have jurisdiction to bring this claim.
Comment
6. This decision appears to contradict the current orthodoxy of employment settlement agreements. In the interest of certainty, employers and employees often enter agreements purporting to settle future and unknown claims that could not be anticipated. In departing from common law principles, this judgment could widen the scope for claims after agreement in the Employment Tribunal. This affords claimants’ more protection, ensuring that they cannot unknowingly bar themselves from bringing a discrimination claim in these circumstances. However, it may affect the value of settlement agreements in the future, knowing that such agreements may not be definitive.
7. It is possible that this judgment could have implications wider than claims brought under the EqA. Section 203 of the Employment Rights Act 1996 (“ERA”) provides that a settlement agreement must relate to the particular proceedings. Although this decision concerns the EqA, the same purposive construction of the statute was applied to the ERA in Hinton. The reasoning above could therefore apply to any claim brought under either Act. Settlements relating to ERA or EqA claims are restricted to those relating to known complaints.
8. As the EAT found for the Respondent in its cross-appeal concerning the seafarer status of the Claimant and the claim remains struck out, it is possible that the Court of Appeal will not have the opportunity to consider the issue, unless the Claimant appeals on the seafarer finding. In the absence of any such appeal, it appears that litigation after settlement agreements has become more likely.
Judgment can be downloaded here.
Elliott Stenson
9 St John Street Chambers