When an employment-related dispute arises and an employee wants to take the matter to the employment tribunal, they must first tell Acas about it.
When they do this, Acas will offer early conciliation, which gives both parties a chance to resolve the problem without going to the tribunal.
If, during the conciliation process, an agreement is reached between the employee and employer, a COT3 agreement may be used to record the settlement terms.
In this article, we'll explain what a COT3 agreement is, what should be included, and how it differs from a settlement agreement.
Table of Contents
- What is a COT3 agreement?
- What is a COT3 form?
- When are COT3 agreements commonly used?
- What payments are included in a COT3 agreement?
- What is meant by ‘payments made in full and final settlement’?
- Should you be cautious about settling future claims?
- Can you negotiate the terms of a COT3?
- When does a COT3 become legally binding?
- Do you need advice from a solicitor for a COT3 to be valid?
- What are the benefits of a COT3 agreement?
- Is a COT3 agreement enforceable?
- What should you do if your employer doesn’t pay the agreed amount?
- What is the difference between settlement agreements and COT3 agreements?
What is a COT3 agreement?
A COT3 agreement is a settlement agreement used to resolve disputes related to employment tribunal claims. A COT3 captures the agreed terms between you and your employer and can be used either before or after failing a formal claim (known as an ET1 form).
If the agreement is made during the early conciliation phase, the conciliation officer notifies the tribunal of the settlement. Alternatively, if you’ve already submitted an ET1 form, you may be asked to tell the tribunal that the matter has been resolved and withdraw your claim.
What is a COT3 form?
A COT3 form is a document that records a legally binding agreement to settle a potential or ongoing claim in the employment tribunal. Both parties sign this form to formalise the agreement reached during conciliation.
When are COT3 agreements commonly used?
COT3 agreements are most commonly used for threatened or ongoing tribunal cases. But they can also be used in large-scale settlements, such as in collective redundancy processes.
What is included in a COT3?
A COT3 does not have a specific format but it should be made in writing for clarity and future reference. This is usually done using the COT3 form.
The terms included typically include whether the employer admits liability and details any compensation owed to the claimant.
The terms in a COT3 should reflect what you and your employer have agreed on, sometimes with the help of a conciliation officer. Typically, a COT3 should:
Identify the parties involved (i.e. the claimant (employee) and respondent (employer).
Provide an overview of the workplace dispute or claims being settled
Outline the agreed terms, including financial compensation, adjustment to employment terms, or other resolution.
Include a confidentiality clause to stop both parties from discussing the matter publicly
Include a clause preventing parties from making negative remarks about each other
Acknowledge that by agreeing to the settlement the claimant forfeits the opportunity to have the dispute considered by an employment tribunal
A COT3 may also include details of agreements made on:
Payments owed and whether or not they will be tax-free
Pension arrangements
Medical or life insurance
Maternity benefits
Company assets like laptops or phones.
Other clauses included in a COT3 are:
A legal advice clause that encourages the claimant to seek independent legal advice before signing the agreement, although this is not a legal requirement.
A cost clause stating there is no legal requirement for the employer to cover or contribute towards the cost of legal advice.
What payments are included in a COT3 agreement?
A COT3 agreement should outline all payments agreed upon and owed to you. It should also specify whether they will be made tax-free or be subject to tax.
Compensation payments up to £30,000 can be tax-free if they are considered ex-gratia payments meant to compensate for your losses rather than being part of your contractual entitlements, like normal wages and holiday pay.
The timing of payments is usually negotiated as part of the COT3, too. Naturally, as an employee, you will want to ensure you receive the agreed compensation before withdrawing your claim to protect yourself if the employer doesn’t pay. On the other hand, an employer may want to hold off making payment until the claim has been formally withdraw.
It is possible to find a middle ground here with the help of the conciliation officer to ensure clarity and a swift resolution to the matter. However, it's advisable to request that the timing of payment be clearly stated within the agreement itself.
What is meant by ‘payments made in full and final settlement’?
This phrase indicates that once certain payments are made, both parties agree that the matter is completely resolved, and no further claims related to those known issues can be brought up later.
It’s important to understand that a COT3 agreement can be used to settle all claims that full under the jurisdiction of Acas for conciliation, including statutory claims related to failure to inform and consult about collective redundancies and claims related to failure to inform and consult about a TUPE transfer.
This means it can resolve current and future disputes as long as the wording clearly shows the intent of both parties to settle such future claims. Therefore, the wording of a COT3 is important and, as such, should be as clear and specific as possible to avoid misunderstandings or disputes later on.
Should you be cautious about settling future claims?
Settling future claims in a COT3 could potentially limit your ability to address new issues that may arise in the future. Therefore, you may wish to push back on this if it seems appropriate. However, you should consider the implications of this carefully and, if unsure, seek advice from a professional.
Can you negotiate the terms of a COT3?
While a standard template is usually used for the COT3 form, you don’t have to accept every clause offered.
You can and should negotiate the settlement figure and certain clauses to ensure the agreement suits your needs and goals.
For example, you may want to secure a reference from your employer to support you in securing your next job. This should be negotiated as part of the COT3 and an appropriate clause written into the agreement to reflect this.
When does a COT3 become legally binding?
A COT3 becomes legally binding if it is communicated to the conciliation officer. This can be done via telephone or email.
It’s important to note that verbal agreements hold the same weight as written ones. Therefore, you should request a draft COT3 in writing, such as through a COT3 form, before agreeing to anything to ensure you’re comfortable with it.
Strictly speaking, a COT3 form isn’t legally required but it's common practice to complete one to document the terms of the agreement and prevent disputes later on, especially if enforcement becomes necessary.
Once a COT3 is finalised, you can’t pursue further claims related to the matters covered, or if a claim has been filed it will be closed.
Do you need advice from a solicitor for a COT3 to be valid?
In a settlement agreement employees must get independent legal advice before finalising it. In these situations, the employer usually contributes all or some money to cover the cost of this.
However, you don’t have to get independent legal advice for a COT3 agreement. If you do, you may be responsible for your costs and the employer doesn’t have to contribute at all.
If you are an employee wishing to get legal advice before entering a COT3 agreement, our network of employment lawyers provides their services for affordable fixed fees to help you make an informed decision.
Get in touch for a free quote today.
What are the benefits of a COT3 agreement?
While an employee must tell Acas they intend to make a claim, early conciliation is voluntary.
However, given the process is free and impartial for both parties involved, using this service and reaching a COT3 agreement is often seen as a quicker and easier way of resolving an employment dispute than bringing a tribunal claim.
What’s more, the process is guided by an Acas conciliator whose role is to assist in reaching a settlement.
During negotiations of a COT3, you may be able to secure an employment reference, apology, or other benefits that you might not get through an Employment Tribunal claim.
That being said, it’s important to note that the Acas conciliator assigned to your case is impartial and they will not offer advice on whether to accept an agreement or assess the merits of your claim. Only an employment law specialist can do this.
Get in touch with us for personalised support with your employment claim today.
Is a COT3 agreement enforceable?
Yes, once a COT3 agreement is reached, both parties must fulfill their obligations. For example, if compensation has been agreed upon as part of the settlement, employers must make the specified payment within the agreed time frame.
For this reason, you should keep a copy of the COT3 form to enable enforcement proceedings if needed. However, if you misplace it your conciliator will keep a copy for up to six months from the settlement date.
What should you do if your employer doesn’t pay the agreed amount?
Tell Acas
If your employer doesn’t pay the agreed amount as per the COT3 agreement, you should first tell Acas who will contact them and remind them of what they agreed to and the consequences if they don’t pay.
Use the free Employment Tribunal Penalty Enforcement and Naming Scheme
If this doesn’t work, the government offers a free service called the Employment Tribunal Penalty Enforcement and Naming Scheme.
To use this you download the form, fill it out electronically, and send it by email with a copy of your COT3 agreement. The employer will then get a warning notice to pay within 28 days and, if they don’t, they could be hit with a penalty of up to £5,000.
Go to court
You can seek the help of a High Court Enforcement Officer through the Acas and Employment Tribunal Fast Track. There is an upfront court fee to do this but the court will add this fee to the amount the employer already owes you when they issue the writ of control.
Much like the Employment Tribunal Penalty Enforcement and Naming Scheme, the employer will get a warning to pay within 28 days. Following this, you'll receive the amount of your judgment plus interest at 8% and costs, which cover your initial court fee.
What is the difference between settlement agreements and COT3 agreements?
Both settlement and COT3 agreements are used to waive employment tribunal claims before they’re made or while in progress.
But, settlement agreements can cover various types of claims including contractual and statutory claims and Acas doesn’t have to be involved.
COT3 agreements are specifically used for claims resolved through ACAS, like unfair dismissal or discrimination. COT3 agreements can also waive future claims, while settlement agreements may have limitations.
Further, settlement agreements must meet specific legal requirements to be valid. This typically involves seeking advice from a qualified legal advisor, such as an employment solicitor or trade union rep. On the other hand, while COT3 agreements have some specific formalities, they may be less stringent and crucially do not require the employee to get independent legal advice.
Get expert advice on COT3 settlement agreements
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