The two exceptions
Section 203 of the Employment Rights Act 1996 stops people signing away their statutory rights. It allows two exceptions: an agreement reached where an Acas conciliation officer has taken action, and a settlement agreement that meets the statutory conditions. The first is recorded on an Acas form called a COT3.
Side by side
| Settlement agreement | COT3 | |
|---|---|---|
| Acas involved | No | Yes, always |
| Independent legal advice | Required | Not required |
| When it becomes binding | When signed by you, your adviser and the employer | When the terms are agreed through Acas, which can be before anything is signed |
| Typical timing | Before or instead of a claim | During early conciliation or after a claim is issued |
| Who drafts it | The employer or its lawyers | The parties, with Acas recording the terms |
| Length | Often 10 to 25 pages | Often 1 to 3 pages |
| Legal fee contribution | Usual | Unusual |
| Must list particular claims | Yes | Can be worded more broadly |
How early conciliation fits in
Before you can start most tribunal claims you must notify Acas. A conciliator then offers to help both sides settle, for up to 12 weeks. If a deal is reached, it is recorded on a COT3. If not, Acas issues a certificate and you can present your claim.
Starting early conciliation also pauses the tribunal time limit, which is why it is the safe step to take if a settlement agreement negotiation is running close to the deadline.
When each is used
Settlement agreements suit planned exits: redundancy programmes, negotiated departures and senior exits where a detailed document is needed for shares, restrictions and announcements.
COT3s suit disputes already under way, where the claimant has no adviser, where speed matters or where the employer wants a wider waiver without the adviser formalities.
Sometimes both are used. Lawyers may negotiate a full settlement agreement during conciliation and ask Acas to record the main terms on a COT3 as well.
A caution about COT3s
Because a COT3 deal can become binding when you tell the conciliator you accept, be clear in every call whether you are agreeing or still thinking. Say "subject to seeing the written terms" until you are sure. Read the wording of the waiver, since COT3s are often drafted to cover all claims arising from the employment and not only the one you raised.
Tax
The tax rules are identical. What matters is what each payment is for, not which document records it.
Frequently asked questions
Is a COT3 safer than a settlement agreement?
Neither is safer. A COT3 has fewer formalities, which means less protection if you agree in a hurry. With a settlement agreement, nothing binds you until you have been advised and signed.
Can I get legal advice on a COT3?
Yes, and it is sensible, but the employer is less likely to pay for it because the law does not require it.
Does Acas tell me if the offer is fair?
No. The conciliator is impartial, passes proposals between the parties and explains the process. Acas does not advise on the value of your claim.
Sources
About this guide. This page is general information, not legal advice, and reflects the law and published government plans on the date shown above. Frederick George is a legal referral service, not a law firm. For advice on your own circumstances we will introduce you to an SRA-regulated solicitor.