Compromising Claims With A Settlement Agreement Or COT3 – How Will It Affect Your Future Rights?

Let’s try to settle it! But beware, of wide-ranging clauses that aim to cover a claim being pursued in the future.

In a recent Employment Appeal Tribunal (EAT) case called Arvunescu v Quick Release (Automotive) Ltd, the Tribunal held that a claim lodged after a claimant had signed a COT3 was covered by its waiver clause.

The COT3 settlement was signed in March 2018 to settle a 2014 claim of unfair dismissal and race discrimination against the Respondent. The Claimant presented a claim in May 2018 alleging that he had been rejected for a role he had applied for in early 2018 with the Respondent’s subsidiary because of his previous employment claim.

The EAT held that the claim fell within the scope of section 112 of the Equality Act 2010, which prohibits one person knowingly helping another do an act of discrimination. However, the Tribunal found that the new claim involved an indirect link with the Claimant’s previous employment with the Respondent and was therefore waived by agreeing the COT3.  As the EAT identified this connection, it held the new claim was covered by the COT3’s wide clauses. “The payment….is accepted in full and final settlement of all or any costs, claims, expenses or rights of actions of any kind whatsoever, wheresoever and howsoever arising…. directly or indirectly out of or in connection with the Claimant’s employment…even though the Claimant may be unaware at this date…” 

A Settlement Agreement or COT3 can cover claims of which a Claimant is not aware of when agreeing to settle their claim or end their employment. Considering the above decision, it is important for employees who continue to remain employed or hope to work for their employer again in the future, to obtain the correct advice about the terms and effects of their agreement, as further disputes could arise later.

It is important for Claimants/employees to fully understand the terms and effects of their COT3 or Settlement Agreement before signing it and remember that a future claim may be covered by the agreement. As the Tribunal will consider the main purpose of any agreement and the fact that they are usually used to achieve a “clean break” between an employee and employer, they must be reviewed carefully with a specialist lawyer.

When a Settlement Agreement/COT3 becomes binding, employees give up rights to bring any legal claim against their employer, which is a significant commitment. Therefore, its important to get the right advice. 

Specialist Employment Solicitors

Morrish Solicitors is a long-established law firm with a team of experienced Employment Solicitors. Our specialist Employment Solicitors advise on negotiations, COT3s and settlement agreements daily and our knowledge and experience mean we are best placed to advise you. If you’d like more information, contact a member of our team today on 033 3344 9603 or simply email [email protected] with your request. 

(Arvunescu v Quick Release (Automotive) Ltd [2022] EAT 26 (23 September 2021) (Michael Ford QC, Deputy High Court Judge)