Alternatives to a settlement agreement

A settlement agreement may be the option your employer puts forward, but it’s not the only route you can take. Depending on where things stand, you could raise a grievance, appeal, take legal action, or resolve matters through Acas.

Raising a grievance or appealing a decision

If you’re still employed and feel unfairly treated, you can raise a formal grievance, which might lead to mediation, changes in how you’re managed, or even a better exit package. It also helps protect your position if the dispute later ends up in an Employment Tribunal.

If you’ve already been dismissed, you may have the right to appeal under your employer’s appeal process. Internal appeals don’t always succeed, but they can put pressure on the employer to think again and can strengthen your position in a later claim. In Polkey v AE Dayton Services Ltd [1987] UKHL 8, the House of Lords confirmed that failure to follow a fair procedure, including the right of appeal, can make a dismissal unfair.

The Acas Code of Practice on Disciplinary and Grievance Procedures also applies. Under section 207A of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULR(C)A 1992), an Employment Tribunal can adjust compensation by up to 25% if either side unreasonably fails to follow the Code. If an employer ignores the Code, compensation can be increased. This is another reason why raising a grievance can be a useful protective step.

Employment Tribunal claims

If you believe you’ve been dismissed unfairly, discriminated against, or had wages unlawfully deducted, making a claim is an option. Successful claims can, of course, lead to an award of compensation. But even if a case has merit, going down the legal route is seldom easy. It’s worth remembering that litigation is conducted in public, time-consuming, and often stressful, even for a successful claimant. If you are thinking about issuing proceedings against your employer, there’s no time to waste. Most claims must be started within three months less one day.

Employment claim deadlines

Here are some of the most common Employment Tribunal time limits:

• Unfair dismissal: three months less one day from termination (section 111 of ERA 1996). Time can be extended only if it was not “reasonably practicable” to bring the claim (Williams v Consignia plc [2002] EWCA Civ 955)

• Discrimination: three months less one day from the last discriminatory act (section 123 of EqA 2010). Tribunals may extend time if it is “just and equitable”, but this discretion is used sparingly (British Coal Corp v Keeble [1997] IRLR 336)

• Unlawful deduction from wages: three months less one day from the deduction, or the last in a series (section 23 of ERA 1996)

• Redundancy pay: six months from termination (section 164 of ERA 1996)

• Equal pay: six months from termination if brought in the Employment Tribunal (section 129 of EqA 2010)

• Breach of contract: three months from termination, but Employment Tribunal awards are capped at £25,000 (Employment Tribunals Extension of Jurisdiction Order 1994)

Miss a deadline and the Employment Tribunal can reject your claim, even if it had merit. Acting promptly is crucial if you are thinking of rejecting a settlement offer.

Acas Early Conciliation and COT3 agreements

To preserve your right to claim, you must usually contact Acas to start Early Conciliation (often called “EC”) within the applicable timeframe. EC is a free service where Acas helps both sides explore settlement.

Starting EC pauses (or “stops the clock on”) the usual Employment Tribunal time limits, and you will normally have at least one month from the date you receive your EC certificate to file a claim.

If a deal is reached, it’s recorded in a COT3 agreement rather than in a settlement agreement. You’ll need the EC certificate number if you later issue a claim.

Remember the Arvunescu v Quick Release (Automotive) Ltd [2022] EWCA Civ 1600 judgment we referenced earlier on waiving “unknown existing claims”? That case was decided on a COT3 rather than a statutory settlement agreement.

What is the difference between a COT3 and a settlement agreement?

Both settlement agreements and COT3s achieve the same thing — they waive claims. However, they come about differently. A settlement agreement is usually offered by the employer as part of an exit package. A COT3 arises through Acas once a dispute has been raised, often after dismissal or when Employment Tribunal proceedings are threatened.

COT3s are most common where:

• the dispute is post-dismissal

• the issues are narrow and clear-cut

• both sides want a quick, low-cost resolution

The other main difference between the two types of agreement is that, unlike a settlement agreement, a COT3 doesn’t require a solicitor (or independent adviser) to be valid. A COT3 is valid because it’s brokered by Acas.

Staying in the role (where that is still an option)

By the time a settlement is on the table, the relationship is often strained. But until you sign or are dismissed, you’re still employed.

For some employees, staying a little longer can provide leverage. It may allow you to:

• raise a grievance to protect your position

• ensure your version of events is on record with HR

• take time to consider your next move while still being paid

This option is not always realistic. If trust has completely broken down, staying may only delay the inevitable. But for some, it can buy breathing space to negotiate better terms or to plan an exit on their own timetable.