In order to protect workers from unscrupulous employers, the law says that they cannot contract out of their statutory rights unless they sign a compromise agreement, which has to satisfy certain specific requirements.

A Scottish employment appeal tribunal (EAT) has said in Hilton UK Hotels Ltd v McNaughton that the language in the agreement has to be completely unambiguous for a future, unknown claim to be successfully compromised.

 

What were the facts in this case?

Ms McNaughton worked for the hotel from April 1974 to May 2003. Between April 1974 and April 1981 she was excluded from her employer's pension scheme because of her part-time status.

When her employment was terminated in May 2003, she signed a compromise agreement, waiving her rights to bring any further claims against the hotel. The agreement referred to "claims that you believe you have against the company for breaches of...", followed by a list of statutes including the Equal Pay Act 1970 (EqPA) and the Sex Discrimination Act 1975 (SDA).

Although she took extensive advice from a solicitor prior to signing the agreement, she was unaware that she had a potential claim because she had been excluded from the pension fund. She then read a newspaper article in August 2003 (after the agreement had been signed), about part-time workers' pension rights.

She brought a fresh claim under the EqPA and SDA, arguing that she had been discriminated against because she had been excluded from the pension scheme as a part timer. And the tribunal said that, despite the compromise agreement, she could pursue her claim.

 

What did the parties argue on appeal?

The hotel argued it was for Ms McNaughton's solicitor to find out any relevant facts about her employment. In this case, it would not have been difficult to discover she had worked part time and, therefore, had a claim under the Equal Pay Act.

Relying on the case of Hinton v University of East London (LELR 102), the hotel argued that although the agreement did not specify the relevant section of the statute (in order to compromise her claim), there was no need in this case since there was only one section under which a claim could be made.

Ms McNaughton, on the other hand, argued that "a party could not, as a matter of law, compromise a claim that they were not aware of." In any event, the language in the agreement could not exclude the present claim because it did not do so in clear enough language.

 

What did the EAT decide?

The EAT did not agree with either of them, but a majority of them said she could pursue her claim, and that employers cannot rely on blanket agreements that simply sign away an employee's rights. That does not mean, however, that future claims (even ones that a claimant does not know about) cannot be excluded.

But to be effective, they have to specifically identify the claim either by describing it or by referring to the relevant section of the statute. And the language used "must be absolutely plain and unequivocal."

In this particular agreement, the EAT agreed that the reference to the Equal Pay Act was "sufficient to identify the type of claim referred to and no further detail of the nature of the claim would require to be given."

However, the agreement then went on to say that her claim could only be excluded if, on 16 May 2003, (the date when she signed it) she "believed" she had such a claim and had raised it with the hotel. That qualification was fatal to the employer's case because it meant that "the contract between the parties was, plainly, that if the Claimant did not have such a belief, then the claim was not waived."

The EAT dismissed the appeal and remitted the case to the tribunal to consider the merits of her equal pay claim.