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COT3 Advice For Employers

What is a COT3 Settlement?

A COT3 Settlement is a legally binding contract between two or more parties in a dispute at work. They are used to settle potential or actual Employment Tribunal claims.

If someone is making a claim to an Employment Tribunal about a workplace dispute, they must inform Acas, who will offer ‘early conciliation’. This gives the parties an opportunity to come to an agreement without having to go to Tribunal.

When a resolution is reached, the Acas conciliator will draw up an Acas settlement form, otherwise known as a COT3, which is then signed by both parties. A COT3 becomes binding at the moment that both parties have agreed the terms, which can be done by email or over the phone.

Once a COT3 has been signed it is both legally binding and enforceable, meaning that the same issues cannot be pursued in the Employment Tribunal, and if a claim has already been lodged it will be closed once the COT3 is signed.

A COT3 is usually offered after a prospective claimant has contacted Acas, but it is possible for you as employers to initiate Acas involvement, if you consider that relevant proceedings may be issued against you.

The role of the Acas conciliator is to:

  • Explain the Acas early conciliation process relating to different types of claims such as pregnancy and maternity discrimination or disability discrimination
  • Encourage the use of internal procedures such as disciplinary and grievance procedures, if available
  • Explain the way Employment Tribunals set about making their decision and what things they take into account
  • Explain how Tribunals decide what to award
  • Discuss the options available, for example the appointment of an independent arbitrator under the Acas Arbitration scheme in appropriate cases
  • Help parties to understand how the other side views the issues
  • Discuss any proposals either party has for a resolution

What the Acas conciliator cannot do:

  • Cannot know what the outcome of a Tribunal hearing would be if it went ahead
  • Cannot advise you whether to accept or make any proposals for resolution
  • Cannot take sides, represent you or help prepare a defence regarding your employee or worker’s claim

What are the benefits of using a COT3?

  • Agreements are decided by the parties, not imposed by a Tribunal. Agreements can cover claims that are outside the jurisdiction of Employment Tribunals such as personal injury or potential claims in the future about events that have not occurred yet
  • Acas conciliation is free, and often is concluded by a few telephone calls. If you are able to settle your differences, this will avoid the time, expense, risk and stress of defending a Tribunal claim
  • Acas doesn’t represent either you or your employee and they are not part of the Tribunal system
  • It’s confidential. Settlement discussions cannot be used by you or your employee at a Tribunal hearing
  • A properly worded COT3, drafted by an expert solicitor, will mean that you have complete peace of mind as your former employee will not be able to bring any claims against your company. It can also safeguard your reputation by including clauses covering confidentiality and the making of non-derogatory comments. Or protect your business by reiterating existing, or even introducing new, post-termination restrictions which prevent your employee soliciting or dealing with your clients for a period of up to one year from leaving

What are the risks of using a COT3?

  • If a COT3 is introduced, particularly in relation to a workplace discrimination claim, the contents of the Agreement and the way it is given to your employee may become admissible evidence as part of any Employment Tribunal proceedings
  • If you circumvent a fair process such as a capability, disciplinary or redundancy procedure without offering sufficient compensation for this, your employee may refuse to sign and may have strong grounds for negotiating a higher settlement or instigating formal workplace procedures, such as a grievance, in order to bring a claim in the Tribunal
  • The relationship of trust and confidence between you and your employee may be destroyed if the way in which the COT3 is offered is badly managed
  • If the compensation agreed is not paid, a COT3 can be enforced in the same way as an unpaid Tribunal award

Can an employer initiate a COT3?

An employer can contact Acas to request talks if they believe a dispute with an employee could lead to a Tribunal claim, or they may suggest that an employee enter into Acas Early Conciliation to reach a settlement if there is a dispute between the parties that cannot be managed informally.

Can a COT3 terminate employment?

A COT3 can terminate employment if this is something that is agreed during the Acas Early Conciliation negotiations or is the outcome of an Employment Tribunal judgement.

Who drafts a COT3?

Once an agreement in principle has been reached, a COT3 may be initially drafted by an Employment Law solicitor acting for one of the parties, although this will also be coordinated by the ACAS conciliator. It can be important to consult an expert Employment Law solicitor to ensure that the agreement covers all issues.


Can a COT3 settle future claims?

The case law on future claims is complex and may depend on the precise wording of the COT3 agreement (see Arvunescu v Quick Release (Automotive) Ltd). If there is a chance that future claims may be an issue it is vital to contact a specialist Employment Law solicitor to ensure that the wording of the Agreement is clear and unambiguous.

Can a COT3 be set aside?

A COT3 can be challenged on the same basis as any other Agreement.  There are circumstances in which a COT3 can be set aside by a Tribunal – for example, due to misrepresentation. It is important to consult with an Employment Law solicitor if you are concerned about a COT3 being set aside.

What is the wording for a COT3?

The wording and terms of a COT3 Agreement will reflect what has been agreed between the parties involved. The COT3 Agreement will often have been drafted by a lawyer. Both parties will have the assistance of a ‘conciliation officer’ employed by Acas who will coordinate the drafting and signing of the Agreement.

Best Practice Advice

Before involving Acas, you should identify where the risk of any future claim may lie and assess your potential financial liability. It may also be wise to use a COT3 where an ex-gratia payment is being made, as in the case of redundancy. This is to ensure that no further claims for compensation can be made against you and/or your company.

In certain situations, it may be necessary to commence “best practice” procedures such as a formal capability, disciplinary or redundancy process before a COT3 offer is made. This ensures that the matter can be resolved, with minimal financial risk and ensures that if negotiations break down, you have an alternative process in place to complete a fair dismissal.

How we will help

We offer comprehensive advisory services to ensure your business is protected. In the first instance, we will thoroughly explore the background issues. We will work with you to ensure there is no unintentional discrimination in any aspect of your process. We also review any outstanding contractual, redundancy, disciplinary, capability and grievance matters before advising on a suitable settlement sum.

How much will it cost?

If you have been contacted by Acas about a potential claim or are considering involving them, please contact us. We are more than happy to have a free initial chat with you to point you in the right direction.

Our fees for a well-drafted COT3 Agreement are usually between £500 and £1,000 plus VAT, depending on the complexity and breadth of the issues.

For example, whether you are reiterating existing or even introducing new post-termination restrictions to protect your business. In addition, you might be asked to pay a contribution to enable your employee to obtain legal advice, usually between £350 and £500 plus VAT.

Where possible, we will offer you a fixed price for a tailor-made Agreement advice package which will include drafting the COT3 and also negotiations with your employee’s legal representative.

We also offer a multiple redundancy Settlement Agreement sign-off service for employers and trade unions. The service offers a professional and efficient way to sign off multiple Settlement Agreements.

If you are an employer and require advice and assistance on any Employment Law matter, we can help. Contact us to find out more on 01273 609911, or email to find out more.


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