Bathgate v Technip  CSIH: Broadening the scope of Qualifying Settlement Agreements
As all employment lawyers know, in order to protect them from being taken advantage of by unscrupulous employers, employees cannot ordinarily contract out of their employment rights. There are only two exceptions. They can do so in a contract of settlement made with the assistance of ACAS, known as a ‘COT3’, or they can do so in ‘qualifying settlement agreement’, but not otherwise.
I recently came across the notes for a talk I gave back in 2006 in which I confidently stated that one of the differences between a COT3 and a qualifying settlement agreement (or a compromise agreement as they were then called), was that a COT3 could compromise claims arising out of future conduct whereas a qualifying settlement agreement could not. Following the recent Court of Session judgment in Bathgate v Technip  CSIH 48, however, it appears that my confidence was misplaced.
Since at least the House of Lords decision in BCCI v Ali  ICR 337,it has been clear that parties can use a COT3 to compromise claims that have not even come into existence, although as Lord Bingham put it ‘If the parties had sought to achieve so extravagant a result they should in my opinion have used language which left no room for doubt’. That is because there is nothing to stop parties at common law from contracting out of future rights; and in order to fall into the ‘COT3’ exception, the only stipulation is that the agreement is ‘made with the assistance of ACAS’. In other words, any otherwise contractually enforceable agreement made with the assistance of ACAS will work; a point well illustrated in the context of post-employment victimisation in Arvunescu v Quick Release  EWCA Civ 1600.
It is slightly different with qualifying settlement agreements. To come within that exception there are a number of hoops that have to cleared, one of which is that the agreement must ‘relate to the particular complaint’. It might be thought that for an agreement to relate to ‘the particular complaint’ then the particular complaint must be capable of being in existence at the time the agreement is signed. That certainly was the view of the EAT in Lunt v Merseyside TEC Ltd  ICR 17, when it said:
'A compromise agreement cannot, therefore, seek to exclude potential complaints that have not yet arisen on the off-chance that they might be raised; it cannot, in other words, be used to sign away all the employee's tribunal rights, as can be done in the case of a negotiated settlement drawn up with the assistance of a conciliation officer.'
That also seems to have been the intention behind the statutory provisions, given the comments of Viscount Ullswater when he introduced the relevant statutory provisions in the House of Lords:
'We are proposing that these procedures should only be available in the context of an agreement which settles a particular complaint that has already arisen between the parties to that complaint.'
That too was Lord Summers’s view when Bathgate was in the Scottish EAT. Drawing from the judgments of Mummery and Smith LJJ in University of East London v Hinton  ICR 1260, that the broad purpose behind the legislation was to protect employees from relinquishing their rights; he concluded that the requirement that a settlement agreement ‘relates to the particular complaint’ could never be met in relation to a cause of action which had not emerged at the time of the agreement.
The Judgment of the Court of Session
Needless to say, the Court of Session came to the opposite conclusion. It reasoned that if Parliament had intended to lay down rules limiting parties’ freedom of contract, it would have expressed them in clear and unequivocal terms; and it had not done so. In its view, all that the words ‘relate to the particular complaint’ required was that the complaint being made was covered by the terms of the contract. It could see no justification for putting a temporal limit on what could be compromised by a settlement agreement, when none existed for a COT3. On a natural reading of the settlement agreement signed by Mr Bathgate, future claims for age discrimination were covered. Accordingly his age discrimination claim, which arose out of conduct which post-dated that agreement, had been validly compromised even before the discriminatory conduct had occurred.
With respect to the Court of Session, its reasons do not seem to me to be entirely convincing. Firstly, it is abundantly clear that Parliament was laying down rules to limit parties’ freedom to contract. It does that in terms at section 144(1) of the Equality Act 2010. The section the Court was interpreting is an exception to that general prohibition, it is not itself a limitation to the right to contract.
Secondly, on one reading of the Court of Session analysis, the statutory requirement for the agreement to ‘relate to the particular complaint’ is entirely superfluous. If the agreement does not ‘relate to the particular complaint’ in the sense used by the Court of Session, then as a matter of contract it will not compromise the complaint. Surely Parliament intended something more by those words than a bland restatement of the obvious. Indeed, I do wonder whether the ubiquitous list of UK employment rights (which Smith LJ had warned against in Hinton) is really quite what Parliament had in mind either.
Thirdly, and perhaps most compellingly, on the Court of Session analysis, the central purpose of the prohibition on contracting out would seem to be undermined. On its analysis, there is nothing to prevent an unscrupulous employer from asking an employee (after advice from an insured lawyer and presumably some form of payment) to sign away their employment rights pre-emptively during the course of their employment. Surely it is that evil that the ‘particular complaint’ requirement was designed to prevent. By definition, ACAS will not become involved until a dispute has arisen, so there is less need for a similar protection in respect of a COT3. But that is not the case with legal advisors. Without some sort of safeguard, they could be brought in to give advice on the waiver of employment rights, even as the ink is drying on the employment contract.
The Court of Session is not technically binding in England and Wales, but its decisions are highly persuasive; and unless and until the issue is revisited by the Court of Appeal, it is likely to be followed. In the meantime, and out of an abundance of caution, I will still be advising employers to utilise a COT3 if they wish to be confident of compromising any claims arising out of future conduct.
Dominic Bayne acted for Mr Bathgate before the EAT and at first instance. He is joint head of PLP’s employment team, and is recognised by the directories as one of the leading employment barristers on the North Eastern Circuit.