Laura Darnley clarified the legal position with regard to gagging clauses in settlement agreements and NDAs in February 2019.
Simon Whitehead discussed the use of gag clauses following the football sex abuse scandal in February 2017 in his piece on buying silence and where the lines are drawn, here.
Simon Whitehead’s response below to the question of Whether settlement agreement’s could be used to settle personal injury claims appeared in employmentsolicitor.com magazine in 2017.
It is a fairly commonly held misconception, even amongst some very experienced HR practitioners, that personal injury claims cannot be dealt with via a Settlement Agreement. This is incorrect.
As a matter of law there is no reason why such claims cannot be included in the scope of an agreed settlement with the employer, at least not in relation to personal injury claims that have already arisen; the position is less clear, however, in relation to claims which have not yet arisen.
Personal injury claim has already arisen
In general terms, where a personal injury claim has already arisen at the point that the settlement agreement is being entered into, it can certainly be included in the scope of the waiver of all claims.
Guidance from the case law suggests that an overarching blanket waiver of claims would probably not be sufficient to validly settle personal injury claims; instead, it is important to specifically identify the fact that such claims are being settled. It is common practice therefore to specifically include personal injury claims in the list of claims settled by the agreement.
On a related note, personal injury claims that have arisen as a result of any acts of discrimination or harassment (for example psychiatric damage) are usually captured by the standard waivers relating to the settlement of these types of legal claims.
In such a case, given that there is a specific incident which has already arisen and for which the employer might face liability for a personal injury claim, it would be wise to specifically identify this in the settlement provisions (by, for example, including a waiver of “all personal injury claims including but not limited to any claim arising from” then giving some details of the incident in question). So long as the wording is clear, the waiver will be legally enforceable and the departing employee will find it extremely difficult to argue that it should not be effective.
Where personal injury litigation has already been commenced, the necessary formalities to deal with this must be observed, albeit that these can still be wrapped up in the Settlement Agreement, by for example annexing an agreed draft consent order to the agreement.
In either case, particularly if the claim is a high value one, it might be wise to flag the issue with the employer’s insurers to make sure they are happy with the agreed terms and that the settlement is effective. They are unlikely to have any concerns with this approach if it effectively deals with the claim without any admission of liability.
Personal injury claim has not yet arisen
The issue is more complicated in situations where a personal injury claim has not yet arisen and the employer is simply trying to protect itself from any potential future claims. There are differing legal opinions as to whether or not any such waiver could potentially be enforceable; some commentators suggest that this is possible so long as clear and unambiguous wording is used.
Others refer to the provisions of the Unfair Contract Terms Act 1977 (UCTA) as the basis for arguing that such a waiver could never be effective as the terms of UCTA would ostensibly render such a waiver void.
In practice a waiver of future personal injury claims that have not yet arisen and/or that the departing employee is not yet aware of, will almost never be acceptable to the solicitor providing the employee with the independent advice required for the Settlement Agreement to be legally effective. As such this technical argument, whilst interesting, is largely a moot point. Instead it is common practice for any waiver of personal injury claims to expressly exclude latent claims i.e. claims that have not yet arisen. This would normally be drafted to work in conjunction with an express warranty from the employee that they are not aware of any such claims to provide the employer with additional comfort in this regard. The effects of these provisions is that only truly ‘latent’ claims would escape the ambit of the settlement agreement in this scenario.