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COT3 settlement agreements

Adrian Fryer

COT3 settlement agreements, negotiated and arranged by Acas, can be a cheap and easy way to settle employment tribunal claims. The Court of Appeal has considered a case where an employee brought a claim after signing a COT3, the terms of which the employer said prevented him from bringing the claim. There is currently conflicting case law on the ability for settlement agreements to waive future, unknown claims. Royal National Orthopaedic Hospital Trust v Howard said that if parties want to settle unknown future claims, the wording of the agreement must be absolutely clear on that. However, in Bathgate v Technip, the Scottish EAT said that the law did not allow parties to settle unknown future claims.

In Arvunescu v Quick Release, the employee worked for the employer for a very short period. He left and brought a race discrimination claim. This was settled by a COT3 agreement which waived all claims the employee “has or may have against [the employer]…arising directly or indirectly out of or in connection with his employment with [the employer], its termination or otherwise”. After his dismissal, the employee applied for a job at an associated company in Germany and was turned down. He brought a victimisation claim against the employer. The tribunal said the COT3 covered the victimisation claim and said it had no reasonable prospects of success. The EAT said the claim fell under a different provision of the Equality Act 2010 (that the company knowingly helped the German company carry out the victimisation) but said it was still caught by the COT3. The employee appealed.

The Court of Appeal said the COT3 agreement applied. The employee had been rejected from the job with the German company before he signed the COT3. It was a future claim that was being waived but one which existed at the time the COT3 was signed. The claim arose not out of his employment but ‘in connection’ with it. The settlement agreement was designed to settle all and any claims existing at the date of the agreement including a claim arising from the job rejection which occurred a month before that.

This case was decided on the basis of the wording of the particular settlement agreement and involved a potential claim where the facts had already arisen at the date the employee signed it. It did not deal with the settlement of future claims arising after the date of the COT3 agreement. There are learning points for employers to take away though. Any waiver of future claims must be explicitly clear and using the words ‘out of’ and ‘in connection with’ is advisable to ensure all possible claims are caught.


Adrian Fryer, Partner & Head of Employment

t: 0151 224 0539