Agreed compensation no bar to further action

McLean v TLC Marketing

Facts

Miss M McLean was employed in a senior managerial post by TLC Marketing. Following her resignation in May 2007, she brought employment tribunal proceedings alleging sex discrimination, victimisation and breaches of equal pay legislation. Through Acas, a COT3 settlement agreement – form used by Acas when it conciliates an agreement between an employee and employer that says the employee will accept compensation instead of making a claim at an employment tribunal – was reached in April 2008.

Under the terms of the COT3, without admitting liability, TLC agreed to pay McLean £28,000, which she agreed to accept in settlement of both her tribunal claims and of “any other claim whatsoever arising out of or connected with her employment and its termination”. TLC also agreed to provide an open reference.

When TLC failed to pay the full amount agreed and failed to provide the agreed reference, McLean issued County Court proceedings. Following a County Court judgment, full payment was made and the reference provided. McLean then issued further tribunal proceedings claiming that TLC had failed to comply with the terms of the COT3 because she had brought sex discrimination proceedings against them. This, she alleged, was a detriment amounting to further victimisation contrary to the Sex Discrimination Act.

Decision

The employment tribunal decided that the COT3 entered into between TLC and McLean removed the tribunal’s jurisdiction to hear McLean’s further victimisation claim as the agreement had the effect of compromising all claims arising out of, or connected with, her employment with TLC.

McLean appealed against this decision, contending that the COT3 did not settle her fresh claim of victimisation as it did not preclude future claims that were not in the contemplation of the parties at the time of entering into the agreement. The purpose of the agreement was only to settle any claims that existed, or could have existed, at the time of the agreement whether the parties were aware of those claims or not. It did not settle claims arising from events that occurred after the agreement was entered into.

The Employment Appeal Tribunal (EAT) allowed the appeal and remitted the matter to the employment tribunal where McLean’s victimisation claim against TLC would be allowed to proceed. The EAT acknowledged that it is possible in a COT3 agreement to waive future claims that may not be in existence and of which the parties may have no knowledge at the time of reaching agreement. However, for this “extravagant” result to be achieved, the language of the agreement must be absolutely clear and must leave no doubt as to what it is that the parties are contractually agreeing to. The language of the COT3 in this case was not sufficiently clear to support the conclusion that the parties intended to exclude future claims.

Implications

COT3 agreements commonly include wording that settles not only existing employment tribunal claims but also “any other claims arising out of or in connection with the employment or its termination”. It is now clear that such wording does not protect an employer against future claims. For a waiver of future claims to be achieved, the COT3 must clearly spell out this intention – for example, by referring to any claims arising from a future failure by the employer to re-employ the employee.

Rachel Power, associate, DLA Piper

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