When resolving an employment dispute, the two most common ways an agreement is formally recorded: a COT3 agreement and a settlement agreement. Whilst both bring legal claims to an end, the two arise in different contexts and arise slightly differently.
A COT3 is a legally binding agreement reached through ACAS during Early Conciliation or during Employment Tribunal Proceedings. It records the terms agreed through an ACAS conciliator.
Its key features include:
- It is facilitated by ACAS
- It can be agreed before or after a tribunal claim is issued
- Independent legal advice not not a legal requirement for its validity
- It becomes binding once terms are agreed
How does this differ to a Settlement Agreement
A settlement agreement is a private contractual agreement between employer and employee. It is commonly used where employment is ending, such as in redundancy situations or agreed exits.
Its main difference to a COT3 is that it must meet strict statutory requirements, such as:
- The employee must receive independent legal advice.
- The agreement must identify the specific claims being waived.
- The adviser must carry professional indemnity insurance.
As a result of these conditions, settlement agreements are typically drafted by one party's solicitor and negotiated directly between the parties, rather than through ACAS.
Why the Distinction Metters
Choosing the correct route for settlement can affect:
- The scope of the claims being waived
- The structure and drafting of terms
- Tax considerations
- The speed of resolution
- The fact that the employee can sign this without paying for advice
Understanding the distinction ensures agreements are legally effective and strategically appropriate.
How can we help
Whether you are negotiating a settlement or considering an alternative resolution, obtaining the correct advice before negotiating and finalising terms is crucial.
If you would like to discuss your situation, please get in touch.
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London, N12 8PW
0203 633 8674
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