What is a COT3?

A COT3 is a form of settlement agreement that records the terms of settlement of an employment tribunal claim (or potential claim, if settled before an ET1 form is filed).

The terms of the COT3 agreement will reflect what has been agreed between you and your employer. In reaching the agreement, you will have the assistance of a “conciliation officer” employed by Acas. A COT3 agreement is a “full and final” resolution to your dispute. This means that you will not be able to make a future Tribunal claim in those matters, or, if a Tribunal claim has already been lodged, it will be closed.

The agreement does not need to be recorded on a COT3 form. It can be agreed between you and your employer in writing or orally with the help of a conciliation officer and it will still be valid and binding. It is advisable to obtain a copy of your COT3 agreement in writing so the terms are clear to both you and your employer, and so that you have the document in case you need to refer to it in future.

If a COT3 has been drafted, check the final version and ensure you are happy with all the terms before you communicate to the conciliation officer. This is because once you communicate the terms of your agreement to the conciliation officer, the agreement cannot be changed. A verbal agreement will be binding. So, before you make a verbal agreement, it is a good idea to ask to be provided with a draft COT3 so that you can check each and every provision which you are agreeing to. 

If you agree to a COT3 during the early conciliation period, your conciliation officer will notify the tribunal that the potential claim has been settled. If you have already submitted an ET1 form, you may be required to contact the tribunal to inform them that your dispute has been settled and you are therefore withdrawing your claim. 

Unlike Settlement Agreements, there is no requirement for you to obtain independent legal advice for the COT3 to be binding. Your conciliation officer should explain the terms of the COT3 and their effect, so do ask questions if you don’t understand something. 

Considerations when negotiating a COT3

A COT3 is a type of settlement agreement, and it will bring a close to the matters you have raised. When settling a dispute, you want to be comfortable with the outcome. There is always a bit of give and take required in any type of settlement negotiation, and it is important that you fully understand the terms in the agreement.  

Here are some additional points to note which are specific to COT3 agreements, compared with other types of settlement agreement: 

• The Acas conciliation officer will work from a standard COT3 template. This does not mean that you have to agree to every clause. You can negotiate for clauses to be changed, added or removed. 
• Unlike Settlement Agreements, there is no requirement for you to obtain independent legal advice for the COT3 to be binding. Your conciliation officer should explain the terms of the COT3 and their effect, so do ask questions if you don’t understand something. 
• COT3 agreements can include things you can’t obtain at an Employment Tribunal, such as an employment reference or an apology 
• You can expect the COT3 agreement to include clauses covering confidentiality, and sometimes the making of non-derogatory comments.  

• Some employers will add a clause to the agreement stating that any compensation paid will be repayable by you as a debt, if the agreement is breached. 
• COT3 agreements should cover everything which you may need to clarify, so think about all the things you may have to cover: for example what will happen to your pension, any medical or life insurance, any SMP or company maternity pay, any company loans or benefits such as a car or bike to work scheme, your notice period, any company equipment such as a laptop, security card, phone, etc.  

Negotiating a reference

• If, as part of your settlement, you want a reference, this should be stated in the COT3. An example of the reference wording should be included as an Appendix to the COT3 agreement. 
• An example clause with regard to a reference could read: ‘On receipt of a reference request for the Claimant on behalf of a prospective employer, the Respondent/Company shall provide a reference in the form attached at Appendix 1 and shall provide no further information. The Respondent/Company will respond to any verbal inquiries in accordance with the wording of the Agreement, and on no less favourable terms’ 

• The conciliation officer cannot write the reference for you. It is for you to agree the wording with your employer. The conciliation officer can facilitate these communications, for example, by emailing the draft reference to your employer on your behalf. It is sometimes helpful for you to initiate the first draft and allow the employer to add and amend as they see fit. When you receive their amendments, you can suggest further changes if you are not satisfied.  
  

Negotiating the settlement figure

• When negotiating a sum of money, it is helpful to be realistic from the start, and to do some research into what your claim would be “worth” if you were successful in tribunal. If your claim proceeds to hearing and you are successful, a tribunal will apply specific thresholds to the amount you can be awarded, based on strict rules. Often headlines in newspapers about compensation awards are misleading. It may be useful to read our ‘Calculating Damages’ page to better understand the tribunal’s approach to compensation. 
• The main benefit to the employer of settling instead of proceeding to the tribunal is typically saving time and money. Asking for what you could realistically be awarded at tribunal is a good starting point. Your employer may also be paying for legal representation. Therefore, there is another cost incentive for them to resolve the dispute quickly. Some employers are also keen not to have to discuss certain issues in a public forum, e.g. discriminatory comments or equal pay.  
• Showing how you reached your requested settlement figure is also a great negotiating tool. Always approach negotiation in a well thought-out, diplomatic manner. Avoid plucking figures out of thin air. 

• Do not take offence if your employer’s counter-offer is low. If you would not be comfortable with that outcome, simply decline the offer. Do not be intimidated. It is quite normal to go back and forth in order to reach an agreeable figure. 

Payment

• The COT3 Agreement should set out the full breakdown of payments due to you, and also whether the sum/sums will be paid free of tax, or will be taxable. 
• A payment of up to £30,000 compensation can be paid without tax being deducted if it is an ex-gratia payment (meaning that it is a compensatory payment, rather than something you are due under your contract). 

Timing of the payment will be an issue for both parties. Your employer will want to ensure that the proceedings have been withdrawn formally before payment is made, whereas you will want to continue proceedings in the event that payment is not made in accordance with the settlement terms. You should push for payment to be made within 14 days of the COT3 being signed. Timing of payment should be clearly stated in the COT3 agreement.

Full and final settlements 

• operate to settle the proceedings or matters specified in the agreement. Any references to payments made “in full and final settlement” will need to be expressly given and will be limited to claims which you and your employer were aware of at the time. 
• Your employer may seek to settle future claims – you should resist this.  

Failure to Pay

There are various options available to you to enforce payment. If the employer does not pay the agreed sum within the time frame specified in the COT3 agreement, you can: 

Inform Acas that you have not been paid

Acas cannot enforce payment. However, they can contact the employer and remind them of the terms of the agreement and the consequences of non-payment or breach of the agreement.  

Use the free penalty enforcement scheme:

• The government provides a free service called the ’employment tribunal penalty enforcement and naming scheme’. It’s not just for employment tribunal awards – you can use it for your COT3 agreement. 
• You can download the form from GOV.UK 
• Forms can be filled in electronically and emailed to ETPenalties@beis.gov.uk. You must also attach a copy of your COT3 agreement to the email. Forms can also be printed and mailed to the address provided. 

• The employer will be issued a Warning Notice that they will incur a Government penalty if they do not pay you within 28 days 
• The Government penalty is up to £5,000. 

Get a court to force them to pay

You can use the services of a High Court Enforcement Officer (HCEO) operating through the Acas and Employment Tribunal Fast Track. 

• You can download the EX728 Enforcement form here 

• You must send the completed form, together with a copy of the COT3 and payment for the court fee, to issue the writ of control. The court will add this fee to the amount the employer already owes you. You can access further information on court fees here. 
• The employer will receive a warning notice giving them 28 days to pay you. 
• If all goes well, you will receive the amount of your judgment with interest at 8% and costs which will cover your initial court fee. 

Visit the Acas website for more information on getting paid as part of an Acas settlement.

This advice applies in England, Wales and Scotland. If you live in another part of the UK, the law may differ. If you are in Northern Ireland you can visit the Labour Relations Agency or call their helpline Workplace Information Service on 03300 555 300.

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