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Bathgate v Technip [2023] CSIH: Broadening the scope of Qualifying Settlement Agreements

<!-- wp:paragraph --> <p>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.&nbsp;There are only two exceptions.&nbsp; 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.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>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.&nbsp; Following the recent Court of Session judgment in <strong><em>Bathgate v Technip </em></strong>[2023] CSIH 48, however, it appears that my confidence was misplaced.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p><strong>Legal Background</strong></p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>Since at least the House of Lords decision in <strong><em>BCCI v Ali </em></strong>[2001] 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’.&nbsp;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’.&nbsp;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 <strong><em>Arvunescu v Quick Release </em></strong>[2022] EWCA Civ 1600.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>It is slightly different with qualifying settlement agreements.&nbsp;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’.&nbsp;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.&nbsp;That certainly was the view of the EAT in <strong><em>Lunt v Merseyside TEC Ltd</em></strong> [1999] ICR 17, when it said:</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>'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.'</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>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:</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>'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.'</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>That too was Lord Summers’s view when <strong><em>Bathgate</em></strong> was in the Scottish EAT.&nbsp;Drawing from the judgments of Mummery and Smith LJJ in <strong><em>University of East London v Hinton </em></strong>[2005] 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.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p><strong>The Judgment of the Court of Session</strong></p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>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.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p><strong>Comment</strong></p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>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 <em>was</em> 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.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>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 <strong><em>Hinton</em></strong>) is really quite what Parliament had in mind either. </p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>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. </p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>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.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p><a href="https://www.parklaneplowden.co.uk/barristers/dominic-bayne"><em>Dominic Bayne</em></a><em>&nbsp;acted for Mr Bathgate before the EAT and at first instance.&nbsp;He is joint head of&nbsp;</em><a href="https://www.parklaneplowden.co.uk/expertise/employment"><em>PLP’s employment team</em></a><em>, and is recognised by the directories as one of the leading employment barristers on the North Eastern Circuit.</em></p> <!-- /wp:paragraph -->

What can a Settlement Agreement settle, and Once a Seafarer always a Seafarer?

<!-- wp:paragraph --> <p><strong>Written by <a href="https://www.parklaneplowden.co.uk/barristers/dominic-bayne">Dominic Bayne</a></strong><em>&nbsp;</em></p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p><em>In <strong>Bathgate v Technip</strong> [2022] EAT 155, the EAT in Scotland addressed those two distinct jurisdictional issues in the context of a claim for post-employment discrimination. </em></p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>On the one hand, Lord Summers held that a qualifying settlement agreement cannot, in principle, compromise future claims arising out of circumstances that had not yet occurred.&nbsp;Indeed, in his view, the common practice of listing a whole series of complaints within a settlement agreement does not satisfy the statutory requirements of a qualifying settlement agreement.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>On the other hand, he also held that because the Claimant had been a seafarer throughout the course of his employment, the tribunal had no jurisdiction to consider his post-employment discrimination complaint.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p><strong>Factual Background</strong></p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>The facts in <strong><em>Bathgate</em></strong> are unusual. Mr Bathgate had spent most of his working life engaged on board non-UK flagged vessels operating outside UK territorial waters.&nbsp;By section 81 of the Equality Act 2010, that employment was not subjected to the anti-discrimination provisions of the Act. For the last 6 months of his employment, however, he had been based at home in Scotland, undertaking various union and training activities, and in January 2017 he accepted voluntary redundancy. Unusually, the terms of his redundancy agreement provided for a future payment to be worked out later by reference to an historical collective agreement.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>It did not become apparent until after he had signed that settlement agreement, that on one reading of the collective agreement (which pre-dated the age discrimination legislation), because Mr Bathgate was over 60 at the date of the termination, no future payment would be due.&nbsp; It was therefore several months after the end of Mr Bathgate’s employment that Technip took the decision that it would not be paying Mr Bathgate the future payment after all.&nbsp;</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>It is difficult to interpret that decision as anything other than directly discriminatory on the grounds of age; and that was the claim that Mr Bathgate brought. It was defended on a number of jurisdictional grounds. In particular, Technip contended that the claim had been compromised by the terms of a qualifying settlement agreement, and that the Equality Act 2010 did not apply to Mr Bathgate because he had been a seafarer whilst employed.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>The Employment Tribunal found in favour of Mr Bathgate on all jurisdictional grounds bar one: it concluded that by signing a qualifying settlement agreement, Mr Bathgate had compromised his claim even before it had arisen; and that it therefore had no jurisdiction to hear it. That issue formed the subject of the appeal. Technip cross-appealed against the finding that the Equality Act 2010 applied to post-employment discrimination against a seafarer.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p><strong>A Qualifying Settlement Agreement?</strong></p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>In relation to the appeal, the EAT focused on the requirement, at section 147(1)(b) of the Act, that a qualifying settlement agreement ‘<em>relates to the particular complaint’</em>. Lord Summers asked himself whether that requirement could ever be met in relation to a cause of action which had not emerged at the time of the agreement; and concluded that it could not. </p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>In coming to that view, he drew support both from the words of Viscount Ullswater, when introducing the Act to the House of Lords, that a ‘<em>particular complaint was one that had already arisen between the parties</em>’; and from the judgments of Mummery and Smith LJJ in <strong><em>University of East London v Hinton </em></strong>[2005] ICR 1260, that the broad purpose behind the section was to protect employees from relinquishing their rights.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>He noted that Lady Smith had previously expressed the apparently contrary view in <strong><em>Hilton UK Hotels v McNaughton </em></strong>EATS/0059/04.&nbsp; In an otherwise useful summary of the law in relation to the analogous provision in the Employment Rights Act 1996, she included the proposition that ‘<em>parties may agree that a compromise agreement is to cover future claims of which the employee does not have and could not have any knowledge’</em>. However, Lord Summers accepted that that comment was drawn from the earlier decision of <strong><em>Royal National Orthopaedic Hospital v Howard </em></strong>[2002] IRLR 849 which related to the general law of contract, rather than the statutory restrictions against compromising away rights. As such, it could be disregarded.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>Perhaps more importantly, in a passage which may cause concern amongst Respondent draftsmen, Lord Summers went further and said in paragraph 25:</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>‘I consider [the section] 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 that lists a variety of possible claims by reference to their nature or section number.&nbsp; Both are general waivers. I consider that both fall foul of the guidance given by Mummery LJ and Smith LJ in <strong><em>Hinton</em>’</strong></p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>If that is right, it renders worthless much of the verbiage that is written into most settlement agreements precisely to ensure that they are of wide ranging effect.&nbsp;</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p><strong>Discrimination against Seafarers</strong></p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>In <strong><em>Walker v Wallem </em></strong>[2020] ICR 1103 the EAT recently had to consider whether the Equality Act applied to a UK citizen on UK soil who was applying to work on board a vessel outside the jurisdiction. It felt compelled to conclude that it did not. However, Kerr J made his discomfort at reaching that decision absolutely clear and doubted that the <em>Equality Act 2010&nbsp;(Work on Ships and Hovercraft) Regulations 2011</em>, which govern the extent to which Part 5 of the Act extends to seafarers, were compatible with the UK’s obligations under the EU Equal Treatment Directive.&nbsp; </p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>That is because the Regulations do not prohibit discrimination against seafarers (or applicants) whilst they are actually on UK soil. &nbsp;He also made it clear that he had been unable to adopt a purposive construction, in line with <strong><em>Marleasing </em></strong>principles, so as to preserve compatibility because the provisions that prohibited discrimination against applicants were the same as those that prohibited discrimination against employees.&nbsp; As he explained at paragraph 31, however, he did not decide the position in relation to post-employment discrimination, which is dealt with under a different part of the Act.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>Against that background, it would have been open to the EAT, and entirely consistent with the decision in <strong><em>Wallem</em></strong>, to conclude that Mr Bathgate did benefit from the protection of the Act. Although section 81 of the Act is explicit that Part 5 of the Act (which prohibits discrimination at work) only applies to ‘seafarers’ in prescribed circumstances, the EAT could have concluded that on a purposive construction that the word ‘seafarer’ did not extend to employees who were no longer actively engaged on board a ship.&nbsp; </p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>Alternatively, it could have concluded, as the Tribunal had done at first instance, that because post-employment discrimination is prohibited by Part 8 rather than by Part 5 of the Act, the disapplication of Part 5 by section 81 did not apply to it. The EAT chose to do neither.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>In the view of Lord Summers, the word ‘seafarer’ could only be understood colloquially as a reference to someone whose habitual workplace was on board a ship.&nbsp;Parliament cannot have intended a person to gain rights when disembarking only to lose them again on re-embarking; so there was no room for a purposive interpretation. In addition, the post-employment provisions were designed to extend a workplace protection beyond the end of employment and could not be read as creating new rights for former employees that they did not have whilst employed.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p><strong>Comment</strong></p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>Lord Summers’ conclusion that a qualifying settlement agreement cannot be used to compromise claims which have not yet arisen is surely correct.&nbsp; It would make no sense for parliament to have legislated to protect employees from signing away their rights, if early in their employment, say, they were permitted to do exactly that. &nbsp;</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>However, his wider conclusion, that a list of statutory provisions falls foul of the requirements of a valid settlement agreement in just the same way a general waiver does, may be more open to question.&nbsp;For one thing, it goes rather further than Smith LJ went herself in <strong><em>Hinton</em></strong>: she stopped short of holding that such a list would not work; and only went so far as to say that she would ‘<em>not regard it as good practice for lawyers to draft a standard form of compromise agreement which lists every form of employment right known to the law</em>’.&nbsp;Nevertheless, it does appear to be part of the ratio of the decision, and for the moment at least, should be assumed to be binding.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>The decision that it is entirely lawful to discriminate against a former seafarer whilst on UK soil is something that many lay people will find difficult to understand.&nbsp;It is to be hoped that the government will head the warning of Kerr J in <strong><em>Wallem </em></strong>that the Regulations do not provide the sort of protection that as a country we have now come to expect.&nbsp;Given the current political turmoil, however, that is likely to be some way down on their list of priorities.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p><a href="https://www.parklaneplowden.co.uk/barristers/dominic-bayne"><em><strong>Dominic Bayne</strong></em></a><em>&nbsp;acted for Mr Bathgate before the EAT and at first instance.&nbsp;He is joint head of&nbsp;</em><a href="https://www.parklaneplowden.co.uk/expertise/employment"><em><strong>PLP’s employment team</strong></em></a><em>, and is recognised by the directories as one of the leading employment barristers on the North Eastern Circuit.</em></p> <!-- /wp:paragraph -->