Bates has agreed there will be no further claims brought following the settlement. A litigation claim was to be heard in the High Court in June.
A Chelsea statement confirmed: "This settlement has been agreed by Chelsea to avoid wasting more management time and to avoid incurring ever-increasing legal fees as a result of the forthcoming trial.
"In reaching this settlement, Chelsea has not admitted any liability. We are pleased of course that this litigation is now concluded and we wish Mr Bates well in the future."