In an earlier post we looked at how far a settlement agreement could validly waive claims in respect of things which haven’t yet happened.  The Scottish Court of Session in Bathgate -v- Technip UK Limited had very sensibly indicated that you can agree not to pursue future rights provided that the settlement agreement contains wording sufficiently clear to identify the particular claims you are waiving. 

That level of precision is very important.  As all the authorities now agree, commonly-seen waiver wording like “all claims of any nature arising out of your employment or its termination” is not effective in a settlement agreement (though it will be in a COT3), because it does not identify the “particular claim” being waived as required by section 203 Employment Rights Act.  The issue is not whether the grounds for a complaint have yet arisen as at the date of the settlement agreement, but of whether they can be described accurately enough in that agreement to catch that complaint if and when they do. 

That can produce some slightly strange results, and it is possible to argue that this month’s Employment Appeal Tribunal decision in Clifford -v- IBMis one of them.

Mr Clifford went off sick in 2008 and has not been back since.  IBM operates a form of self-funded PHI scheme under which long-term absent employees are paid a proportion of their salary until the first of recovery, retirement or death.  The scheme contains a discretion on the part of IBM to increase the base salary used for that purpose, but also an express denial of any obligation on its part to do so.  In 2013, Clifford raised a grievance to the effect that he should have been put on that scheme.  As part of the resolution reached with him, he was given access to it in consideration for a valid settlement agreement under which he waived any other claims he might have in respect of disability discrimination arising from his going onto that plan “whether or not they are or could be [his] contemplation at the date of [that] agreement“.  He also accepted that the settlement agreement and the wording of the relevant sick pay plan together set out the entire agreement and understanding between the parties.

IBM did not exercise its discretion to increase the basic salaries used to calculate payments under its sick pay scheme.  This had the obvious consequence that the real value of the payments Clifford received shrank over time, especially relative to the incomes of those of his colleagues who remained actively working.  In 2022 and even though he had not by then done any work for IBM for 14 years, he started direct, indirect and section 15 Equality Act “something arising” disability discrimination proceedings in the ET, seeking increases in his sickness benefit comparable with the pay reviews received by those colleagues. 

IBM raised two preliminary issues – first, that as a matter of law, those claims had no reasonable prospect of success, and second, that they were in any event blocked by the settlement agreement he had signed in 2013.  In other words, had that agreement identified these new allegations as “particular claims” for the purposes of section 203?

Clearly Clifford knew in 2013 that he was going onto the scheme, that it would initially pay him at 75% of his then salary and that there was no contractual entitlement to any increase in that.  He could obviously make no claims in relation to any of that.  What he did not (and could not) know was that IBM would not then exercise its discretion to increase that base figure over at least the next nine years. 

Nonetheless, the ET and EAT both took the view that the 2013 settlement agreement covered Clifford’s new claims.  He knew what he knew about the scheme itself, but had also accepted that scheme-related claims were waived whether or not they were in his contemplation.  Because of the “entire agreement” wording, he knew also in 2013 that there was no implied term or expectation that IBM’s discretion to increase scheme salaries would be exercised at any particular time in the future.  The settlement agreement’s reference to possible disability claims arising out of his benefits under the sick pay scheme was therefore specific enough to cover the arguments he was now making. 

As we queried in the post about Bathgate, however, is that necessarily right?  More than once in its decision the EAT agreed that as a matter of public policy, an employee could not validly waive claims in relation to, say, sexual harassment which had not yet happened.  That would leave open season on the employee with no right of recourse.  But if IBM’s decisions over those nine years not to increase payments to the disabled employees in its sickness scheme were discriminatory or unlawful on some other basis, how is that different?  Again, public policy would surely prevent an employee agreeing validly to waive future unspecified acts of unlawful discrimination. In the circumstances, the determination that Clifford’s claim was blocked by the 2013 agreement seems may be a tiny bit premature.  Surely the ET should have decided first whether IBM’s decisions were discriminatory? 

Perhaps anticipating this sort of argument, the EAT turned swiftly to IBM’s reasonable prospects argument and nodded it through. The direct discrimination claim could not succeed because the relevant circumstances of Clifford and his comparators were not the same – they were working for their pay increases and he was not.  The indirect discrimination claim required the no-increase policy to apply to everyone, but it did not, only those on the sick pay plan.  The section 15 “something arising” argument also fell on its tiny face straight away because by no stretch of the imagination could Clifford’s going onto IBM’s home-grown PHI scheme be described as unfavourable treatment.  It was an exceptionally generous scheme affording a level of financial protection to its members vastly in excess of anything required by law.  IBM’s right not to increase base salaries under it was just one term of that very favourable scheme.  It could not be plucked out of the whole and looked at in isolation from the rest. 

So the answer would have been the same anyway. But what can employers take from this case?

  1. That the more details about the claims or circumstances possibly giving rise to claims which can be added into your settlement agreement, the better;
  1. That it makes sense to include reference to the waiver applying irrespective of the parties’ current state of knowledge;
  1. That “entire agreement” wording can be helpful; and
  1. That you cannot buy yourself the right to commit future acts of discrimination or harassment, as a minimum unless the employee is aware in details of the nature and extent of those acts at the time of signing.