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The importance of a settlement agreement

Clifford v IBM United Kingdom Ltd (10 June 2024)

Settlement Agreements – Future Discrimination Claims Precluded

A recent important judgment this week in Clifford v IBM United Kingdom Ltd [2024] has restated the importance of a carefully drafted settlement agreement for employers and employees. This case highlights the critical role these agreements play in employment law and their impact on employment disputes.

What is a Settlement Agreement?

A settlement agreement is a legally binding contract between an employer and an employee. These agreements can be used to terminate employment or resolve an ongoing dispute. Importantly, an employee cannot be forced to sign a settlement agreement.

For a settlement agreement to be legally binding under Section 203 of the Employment Rights Act 1996, it must:

  • Be in writing.
  • Relate to a specific complaint or proceedings.
  • State that the conditions regulating settlement agreements under the Employment Rights Act have been satisfied.
  • Identify the legal advisor for the employee and state their advice is covered by insurance.


In addition, the independent legal adviser must advise the employee on the terms and effect of the settlement agreement, and the impact on their ability to pursue employment tribunal claims.

Clifford v IBM United Kingdom Ltd

The claimant, Clifford, signed a settlement agreement agreeing to move on to a Disability Plan and receive disability salary payments at a specified level. Under the settlement agreement, the claimant waived his right to bring specified claims, including disability discrimination, whether or not they were or could be in the contemplation of the parties at the date of the agreement.

The claimant later made complaints of disability discrimination, including complaints about not receiving annual salary reviews and the level of payments not increasing since he entered into the claims.

The Employment Appeals Tribunal applied the decision in Bathgate v Technip Singapore PTE Ltd [2023] and found that the Employment Tribunal was correct to strike out the claimant’s claims for disability discrimination because they had been precluded by a settlement agreement.

Section 147 of the Equality Act 2010 provided conditions for settling a claim using a valid settlement agreement. One of those conditions is that “the contract relates to the particular complaint” under section 147(3)(b) of the Equality Act 2010. Bathgate v Technip Singapore PTE Ltd 2023 was applied, holding that future unknown claims could be validly compromised by a qualifying settlement agreement, despite the claimant remaining employed after the settlement agreement was signed.

The unknown future claims must be clearly identified, and the meaning of the words used encompasses the settlement of the relevant claims. Particular complaints do not mean its grounds were known to exist at the time of the agreement and the Employment Tribunal ruled that the settlement agreement did relate to the particular complaint.

The Employment Tribunal noted the difference between Clifford and Bathgate; in Bathgate, the employment had ended, and in Clifford, the employment had continued. However, it held that this distinction did not affect their decision on the current statutory provisions or case law.

This case is a crucial reminder that settlement agreements need to be well-drafted with the parties’ intentions at the forefront. Ensuring that a settlement agreement is comprehensive and clear can prevent future disputes and employment litigation. Learn more about settlement agreements here.  

If you need advice or help to negotiate and draft a settlement agreement, please contact us at 0333 888 1360 or complete the enquiry form and we’ll get back to you as soon as possible.

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