Alongside settlement agreements, COT3 agreements are a key way of resolving employment disputes in Great Britain. A COT3 is a form of settlement arranged with the assistance of Acas, the Advisory, Conciliation and Arbitration Service. It can be used to compromise Employment Tribunal claims or potential claims, and is often used during Acas early conciliation.
The key feature of a COT3 is that the terms are agreed through an Acas conciliator, who records the agreement either in writing or, in some cases, orally before confirming it in writing. Once the parties indicate their agreement to the terms, the COT3 becomes binding. There is no legal requirement for the employee to receive independent legal advice, although in practice many people do seek advice on the terms before agreeing to them.
By contrast, a settlement agreement is a private contract between employer and employee. It can be used whether or not Acas is involved and whether or not a Tribunal claim has been issued. For a settlement agreement to be valid, the employee must receive advice from a relevant independent adviser, who signs an adviser’s certificate and confirms they hold appropriate insurance. This statutory safeguard does not apply in the same way to a COT3.
There are other differences. COT3 agreements tend to be shorter and more focused on resolving specific claims or potential claims. Settlement agreements usually cover a wider range of matters, including tax clauses, confidentiality, post‑termination restrictions, references, announcements and warranties. Settlement agreements are also more commonly used where the employment relationship is ending by agreement, for example in redundancy or negotiated exits.
So when might a COT3 be more appropriate than a settlement agreement? COT3s are often used where there is a live Tribunal claim or where early conciliation has already begun. They can be a quick way to finalise settlement terms without extensive drafting, and Acas involvement can help parties reach agreement. Settlement agreements are more flexible and can be tailored to complex situations, senior exits or cases where detailed ongoing obligations are needed.
Employees and employers across England, Wales and Scotland should understand both options. In some cases, a settlement agreement is the best route; in others, a COT3 may be more efficient. Taking advice from a solicitor who regularly deals with both types of agreement ensures you choose the right tool for your dispute.
