Can a compromise agreement waive future claims?

Can a compromise agreement waive future claims?

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In March 2023 an Employment Tribunal (ET) struck out the claimant’s claims in Clifford v IBM ET 3302436-2022. It gave two reasons: (1) that the discrimination claims had been compromised by a 2013 compromise agreement between the parties; and (2) on the basis that in their view neither the unlawful deduction of wages nor any of the discrimination claims had reasonable prospects of success. In our view the decision was erroneous. Having represented Mr Clifford in the ET, we are now acting pro bono with barrister Conor Kennedy  of Old Square Chambers in the Employment Appeal Tribunal (EAT).

The facts of the case are that Mr Clifford is disabled and has been incapacitated from working since 2008. In 2013 he entered into a compromise agreement with IBM where he was transferred to a self-insured salary replacement scheme, like permanent health insurance (PHI or GIP, group income protection) benefits, whereby he receives 75% of his salary for the remainder of his working life because he is incapable of working. Mr Clifford contributed financially towards this insurance throughout his employment with IBM. While Mr Clifford agreed to waive his rights to pursue claims that were the subject of his grievances at the time of the compromise agreement, he argued that such agreement did not compromise future claims which had not arisen at the time of the settlement.

Mr Clifford’s current claims are for unlawful deduction of wages on the basis that he had accrued contractual annual leave and should have been able to carry over annual leave between holiday years, and discrimination claims in relation to his disability benefit payments not being reviewed or increased since 6 April 2013. Mr Clifford attempted to resolve his complaints internally but met with a blanket refusal from IBM to consider his complaints. Their response was simply to say that his benefits were not subject to review or increase. The compromise agreement included provision that the payments under the salary replacement scheme would be reviewed regularly. The Respondent has however to date failed to provide any evidence that any reviews were in fact conducted. It was with great regret that the Claimant felt that he had no option but to file a claim in the Employment Tribunal.

A preliminary hearing was held to consider the impact of the 2013 compromise agreement on claims arising after the agreement was signed. The hearing also dealt with whether the claim for unlawful deduction of wages should be struck out for little or no reasonable prospects of success. EJ Housego found in the Respondent’s favour and dismissed all the Claimant’s claims.  

In my opinion the ET decision is flawed and I have assisted Mr Clifford in filing an appeal. The basis of Mr Clifford’s appeal is that EJ Housego erred in law in finding that the disability claims were validly waived by the 2013 agreement, in that it failed to follow the binding authority of Bathgate v Technip UK Limited. This case held that only claims that exist at the time of the compromise agreement are capable of being validly waived. The case is clear authority that the words “particular complaint” do not describe a potential future complaint.   The EJ seemingly preferred the decision of Arvunescu v Quick Release (Automotive) Ltd. In my view this is erroneous. In Arvunescu the ET had erred when it decided that claims that did not exist at the time of a compromise agreement could be waived. In any case the decision is an authority on the proper construction of a COT3 agreement, not, as in this case, a compromise agreement. 

Mr Clifford argues that the ET erred in striking out the discrimination claim when the Respondent had not made a strike-out application and the Claimant had not been given an opportunity to present arguments to the ET. It made an error in reaching a decision on a point which had not been argued and which was not on the list of issues in the case.  When considering that the discrimination claim had no prospects of success, the ET had not considered all the discrimination claims that had been brought; it looked only at the direct discrimination claim. 

The EAT appeal has been acknowledged by the court. We await hearing whether the EAT will consider the appeal and continue to believe that the appeal has good prospects of success.  Watch this space!

This update was written by Anita Vadgama, Partner at didlaw.