A COT3 is a legally binding settlement agreement, which is a contract between an employer and an employee, in which the employee agrees not to make or pursue any claims against the employer in exchange for other terms, usually, financial in nature.

A COT3 differs from a Settlement Agreement, as a COT3 is agreed through ACAS and does not require either party to take legal advice.  If a claimant triggers Early Conciliation or pursues a claim, ACAS should be on hand to conciliate. If the conciliation is successful, a COT3 is usually entered into.

Be warned, once both parties confirm verbally to ACAS that terms are agreed, a binding settlement is achieved, and the claim is settled. There is then no going back. 

A non COT3 settlement agreement (i.e. not agreed through ACAS) requires the employee to take independent legal advice, so is often used outside Early Conciliation or once a claim has been issued (although a COT3 can still be used in those circumstances).

FAQs:

What are the benefits of using a COT3?

A COT3 can be a useful tool to settle disputes. Settlement in general helps avoid costly and time-consuming employment tribunal claims. It can also provide clarity and certainty for both parties regarding the terms of the termination of employment and/or the conclusion of litigation.

What should be included in a COT3?

A COT3 should set out the terms of the agreement between the employer and employee. It should be signed by both parties, and each party should receive a copy of the agreement.

Common terms that are included are:

- whether any post-employment restrictions will apply

- how the litigation will conclude (e.g. will the Claimant withdraw the claim)

- when and what will be paid to the employee

- whether a reference will be provided

- clauses preventing derogatory/disparaging statements being made

- confidentiality restrictions. 

How do I go about creating a COT3?

If you wish to create a COT3, you could seek legal advice to ensure that the agreement is drafted correctly and meets your specific needs. ACAS can help draft a COT3, but this may well offer less protection and certainty. Once the agreement has been finalised, both parties will need to sign it in order to make it legally binding.

What happens if one of the parties doesn't agree to the terms of the COT3?

If one of the parties doesn't agree to the terms of the COT3, then agreement will not be reached and the COT3 will not be legally binding. Without settlement the case will continue to an employment tribunal hearing.

I'm an employer - can I use a COT3 to prevent my employees from making claims against me in the future?

A COT3 can help to avoid employment tribunal claims, but it cannot act as a way to completely prevent future and unknown claims if someone is to remain an employee.

If an employee has left and a COT3 is agreed, it will act to stop all future claims, assuming you honour the terms of the COT3.

What are the consequences of breaching a COT3? 

If a party breaches a COT3, they may be liable for damages. I will be a breach of contract and the other party could claim for any losses they suffer as a result. The amount of damages will depend on the terms of the agreement, the extent of the breach and the losses suffered.

How long does it take for a COT3 to become legally binding?

A COT3 becomes legally binding immediately when the terms are agreed by both parties to ACAS. This means that COT3’s do not need to be signed by both parties to be effective. 

Is a COT3 enforceable?

Yes, a COT3 is a legally binding contract.

What role does ACAS have in relation to a COT3?

ACAS will co-ordinate the negotiation of a COT3. ACAS cannot provide advice or guidance on the claims or terms, it simply acts as a ‘go between’.

Once terms are agreed and if a claim has already been issued in the Tribunal, ACAS notifies the Tribunal that settlement has been reached.

How do I negotiate a COT3 agreement?

The process of getting a COT3 can be quite simple:

●      Either party makes an offer via ACAS.

●      ACAS, relay the offer to the other party.

●      Once terms are agreed the finer wording of a COT3 can then be agreed.

●      Once the ACAS officer is told by both parties that they agree the terms of the COT3, it becomes legally binding.

Our expert employment law solicitors all have many years’ experience advising individuals who are in your position. We will be able to guide you through the process and to help you secure the best possible outcome.

We offer a range of services, so please contact our friendly customer services team to discuss further via hello@kilgannonlaw.co.uk or 0800 915 7777.

Disclaimer 

The above provides a general overview relating to employment tribunals and is not intended nor construed as providing specific legal advice.

This article is for information purposes only and is correct at the time of publication. It does not constitute legal advice.

15.07.2023