The recent EAT decision of Clifford v IBM United Kingdom Ltd [2024] EAT 90 confirms that future claims can be waived under a settlement agreement, even when the employee remains in employment. The employer-friendly approach adopted in this case may well offer reassurance to employers seeking to achieve full closure to employee disputes (past and future) using settlement agreements. However, employers should proceed cautiously – this is not a hard and fast rule and the effectiveness of a waiver of future claims depends on the drafting.
Facts of the case
Mr Clifford had been on extended sickness absence from his employment with IBM since 2008. After four years on sick leave, Mr Clifford raised a grievance alleging that IBM’s failure to increase his salary or pay holiday pay while he had been on sick leave amounted to disability discrimination.
Following the grievance and appeal process a settlement agreement was signed by the parties in 2013. Under the terms of the settlement agreement, IBM agreed, among other things, that Mr Clifford would remain employed as an inactive employee and be placed on IBM’s disability plan, which meant he was to be paid 75% of his former salary until retirement.
In return, Mr Clifford agreed to waive his rights to bring a long list of employment-related claims, including disability discrimination claims, whether or not they were or could be in the contemplation of the parties at the time. The settlement agreement expressly recorded that Mr Clifford’s waiver of would not include:
“claims which arise after the date of this Agreement and which: (i) are not connected to the matters set out in the Grievance or Appeal; or (ii) do not arise out of the Claimant’s transfer to the Plan.”
Some nine years later, Mr Clifford did bring claims against IBM. These included a discrimination claim for having only paid 75% of his previous salary to him and not to have awarded pay increases to him while he was on the disability plan – i.e. he brought claims both connected to the matters set out in the grievance and arising out of his transfer to the disability plan.
IBM applied for a strike out. The strike out was granted by the Employment Tribunal and that decision was later upheld by the EAT. It was held that Mr Clifford had agreed to waive his rights to bring the relevant claims under the 2013 settlement agreement and the wording in the settlement agreement was sufficiently clear to give effect to the waiver of future claims – so his claims were precluded.
In coming to its decision, the EAT considered the ruling in the Scottish case of Bathgate v Technip Singapore PTE in which it was found that unknown future claims can be waived under an appropriately worded settlement agreement. It considered that the key facts and circumstances here were indistinguishable from Bathgate, despite Mr Clifford remaining in IBM’s employment. As such, provided appropriately clear language is used and not blanket waivers, whereby employees could sign away their rights without appreciating the significance of what they were doing, settlement agreements can effectively waive future employment claims.
Key take aways
This decision highlights the importance of clear drafting in settlement agreements to waive future claims. In practice, many settlement agreements contain blanket waivers and/or standard precedent terms, which may not be sufficiently precise and relevant to the dispute at hand in order to validly waive future claims. As such, we recommend carefully tailoring the waivers to the relevant matter. Achieving robust waivers of future claims will be particularly important where employment is continuing, since this increases the likelihood of future claims.
Note that this case does not go so far as saying that all types of future claims can be waived in settlement agreements. Indeed, the first instance Employment Tribunal (although not binding) suggested that waivers which give rise to issues of public policy (e.g. waiving future sexual harassment claims) may not be valid.
Employers may see this decision as a step in the “right direction” towards achieving finality under settlement agreements, particularly given the synergy with the recent similar Court of Appeal ruling in relation to COT3s in Arvunescu v Quick Release (Automotive) Ltd. However, since each case will be different and turn on its own facts, for the best chance of achieving finality, check your drafting!