If you have an employment dispute or have already submitted an employment tribunal claim, ACAS (the Advisory, Conciliation and Arbitration Service) can help you try to agree a settlement with your employer before your claim goes before a tribunal hearing. ACAS use what’s commonly called a ‘COT3’ document to outline the terms you have agreed.
This guide explains what a COT3 is, when one would be used and what the main differences are between a COT3 and a normal settlement agreement
What is a COT3?
A COT3 is a type of settlement agreement used by ACAS when it (ACAS) has helped you and your employer reach an agreement before your employment claim gets to a tribunal hearing.
It is also often referred to as an ACAS settlement, COT3 settlement or COT3 agreement.
A COT3 sets out the terms for settling an employment tribunal claim that you have against your employer.
This will normally include the compensation paid to you in return for you giving up your right to pursue your claim, or agreeing to withdraw it if you have already started legal action.
Why is it called a COT3?
We don’t have conclusive evidence on this! Some sources say it derives from when the Central Office of Tribunals (COT) had a Form 3 (hence COT3) which was a settlement agreement template. Others say it’s an acronym for ‘compromise of tribunal’ (but they don’t say what the ‘3’ refers to).
ACAS role in employment tribunal claims
If you wish to take a claim to an employment tribunal, you first have to submit it through ACAS in a process called ACAS early conciliation.
Once your claim has been accepted for an employment tribunal hearing, you have a choice about what, if any, help you would like in order to take your claim to the final employment tribunal hearing stage. Your options are:
- To go it alone and represent yourself throughout the process
- To employ an independent specialist employment solicitor
- To represent yourself with occasional help from an employment solicitor
Whichever option you decide, ACAS can assist you to reach a settlement, if that’s what you want to do.
For more information about these options, see our guides on ACAS, employment tribunals and also a claimant’s journey through the employment tribunal system.
Settlement prior to the employment tribunal
You can choose whether to use an ACAS mediator (called a ‘conciliator’) or an employment solicitor to help you settle your claim.
However, one of the things they will both do is to encourage you to reach a settlement with your employer before the tribunal hearing.
There are many advantages to reaching a settlement, not least the certainty it brings and the time and expense that it saves all parties.
If you use an ACAS conciliator and they reach a settlement with your employer, the COT3 agreement summarizes the terms you have agreed.
When would a COT3 be used?
A COT3 would only be used if ACAS had mediated between you and your employer to reach a financial settlement.
Alternatively, you could opt for a normal settlement agreement to be drawn up by your own employment lawyer. This would have the advantage of focusing solely on your individual requirements and your best interests.
We recommend you seek legal advice from a solicitor on the terms of a COT3.
(See below for a summary of the main differences between a COT3 and a settlement agreement.)
How do you start a COT3 settlement?
The following are the main steps in getting a COT3 settlement underway:
- Typically, following negotiations, your employer will offer you a financial settlement via your ACAS conciliator.
- If you’re happy with the offer, the ACAS conciliator will coordinate the COT3 content drafting.
- The initial wording will most likely be drafted by your employers’ solicitors.
- You aren’t required to take independent legal advice on its contents, as you are with a normal settlement agreement. (See more about this below.)
- So, if you want legal advice on the content of the COT3 – which we would strongly recommend – then make sure you get it from your own, independent employment lawyer.
- Once drawn up and agreed upon (verbally or by email), the COT3 agreement becomes legally binding.
- You do have to sign it at some stage, but it doesn’t require your signature before it becomes legally binding.
Do you have to pay for a COT3?
ACAS is a government-funded body whose services are free to its users. So you don’t have to pay anything to have a COT3 drawn up.
However, if you incur legal costs – for example, by asking a specialist employment lawyer to review the COT3 and advise you on its contents – then you should ask for a sum of money from your employer to be included that will cover reasonable legal costs.
What are ‘reasonable legal costs’ would vary, depending on how complicated your case was and on your solicitor’s standard charges for such agreements.
You should ask your solicitor how much would be reasonable in your particular case.
Remember that, if you were having an ordinary settlement agreement drawn up by your independent legal advisor, a sum of money (typically starting from about £350 up to £1,500 (or more), plus VAT) would be included for legal advice on the agreement.
This would be paid for by your employer. (See our guide to finalising a settlement agreement for more.)
Similarities COT3 and a settlement agreement
COT3 agreements and ordinary settlement agreements do share some features in common, including:
For both, the contents are agreed by the parties involved, not by the employment tribunal.
You can get things added (eg references, confidentiality clauses) that a tribunal cannot award you, even if you win your claim.
The contents of both types of agreement normally include a clause requiring the settlement to be kept confidential.
On the other hand, employment tribunal hearings are usually held in public and their findings are accessible by members of the public.
Action can be taken to enforce payment of the settlement amount agreed by your employer, whether that is in a COT3 or settlement agreement.
Similarly, employees can be taken to court if they are found to be in breach of a COT3 or settlement agreement.
Limitations of ACAS conciliators in COT3 negotiations
Whilst COT3s have some advantages over ordinary settlement agreements, (eg shorter length, less time taken to draft), ACAS conciliators are limited in the ways they can help you as a claimant.
Some examples of the limitations of ACAS conciliators are outlined below.
ACAS conciliators can’t give you legal advice
Even if your ACAS conciliator was qualified to give you legal advice, they are not permitted to do so. For example, they can’t advise you on:
- Whether the offer is a reasonable one when compared with the merits and potential value of your claim. For instance, should you accept it or be seeking a higher amount? Only an independent legal adviser can advise you on this.
- The kinds of claims you are making and whether you should be making further claims in addition to those outlined in the COT3 (eg claiming for discrimination as well as unfair dismissal)
- Whether any part of your case should be referred to a civil court. Parts of it may not be within the jurisdiction of an employment tribunal (eg some types of personal injury).
The value of any breach of contract claim may also be higher than the award limits you can get at an employment tribunal (which is £25,000 in 2022/23).
An independent employment solicitor has a duty of care to their clients first and foremost. They will advise you on all relevant legal dimensions of your agreement, including the above.
ACAS conciliators have to be impartial in COT3 negotiations
While you might think it’s a good idea for a conciliator to be impartial, there are disadvantages.
For example, a conciliator has to consider the claims of both sides – your employer and you – equally. They would not favour your case over your employer’s nor try to increase the amount of your settlement.
By contrast, a solicitor who was representing you would take your side and try to negotiate the highest possible settlement for you.
An ACAS conciliator cannot advise on tax or benefit implications of a COT3 settlement
An ACAS conciliator cannot give you advice about the tax implications of a COT3 payment.
You may need advice from a Benefits adviser or an Accountant depending on your personal circumstances.
See our guide on settlement agreements and tax for more.
Monaco Solicitors are experts in negotiating and drafting COT3s – as well as settlement agreements – for employees.
So if you are contemplating a COT3 agreement, get in touch with us before you agree on it.
We can advise you on all of the legal and other issues such as those outlined above, on whether or not your COT3 offer is fair and what to do if it’s not.
If time permits we may also be able to negotiate an increase in the total settlement amount on offer.
So get in touch as soon as you can, via
- This link
- Phone: 020 7717 5259
- Email: firstname.lastname@example.org
Our related guides
- Settlement agreements, compromise agreements and how much should I get?
- Employment tribunals: An overview
- Employment tribunals: Commencing the Acas pre-claim process
- Employment tribunals: Your journey as a claimant
- Tax implications of settlement agreements
- Finalising a settlement agreement: Guidance for employees