Employment Tribunal Settlement: Guide to Settling Before Hearing

Most employment tribunal claims settle before reaching a final hearing. Understanding how settlement works and when to consider it can save time, money, and stress while achieving a fair outcome.

Why Settle?

For Employees

Certainty:

• Know the outcome
• Guaranteed payment
• No risk of losing
• Definite timeline

Speed:

• Quicker than hearing (6-12 months)
• Get money sooner
• Move on faster
• Less waiting stress

Reduced stress:

• Avoid hearing anxiety
• No cross-examination
• Less formal process
• Maintain some control

Practical benefits:

• Agreed reference wording
• Confidentiality possible
• Avoid public hearing
• Preserve some relationships

For Employers

Cost control:

• Cap compensation amount
• Avoid escalating legal fees
• Reduce management time
• Limit exposure

Certainty:

• Known outcome
• Define all terms
• Prevent further claims
• Close the matter

Risk management:

• Avoid uncertainty of tribunal
• Prevent precedent setting
• Avoid publicity
• Control narrative

Efficiency:

• Save preparation time
• Avoid hearing disruption
• Free up resources
• Move on

When Settlement Happens

During ACAS Early Conciliation

Before claim filed:

• 1-6 weeks from contact
• Free ACAS assistance
• No claim on record
• Completely confidential

Success rate:

• About 50% settle at this stage
• Saves tribunal claim
• Quickest resolution
• Often most cost-effective

After Claim Filed

Before response deadline:

• Employer has 28 days
• Early settlement possible
• Before significant costs
• Claim can be withdrawn

During case preparation:

• After disclosure
• When evidence clear
• Strengths/weaknesses known
• Often 3-6 months in

At the Tribunal Door

On hearing day:

• Before hearing starts
• Very common
• Last chance to avoid hearing
• Concentrate minds

Advantages:

• Both sides prepared
• Judge may encourage
• Reality check moment
• Save hearing costs

During the Hearing

Mid-hearing settlement:

• Judge may adjourn for discussions
• After some evidence heard
• When outcome becoming clear
• Avoid rest of hearing

Types of Settlement

COT3 Agreement

Through ACAS conciliation:

• Most common method
• Free service
• ACAS facilitates
• ACAS records terms

Binding without legal advice:

• Employee doesn't need lawyer
• Still legally binding
• Prevents further claims
• Enforceable as contract

When available:

• During early conciliation
• After claim filed
• At any stage
• ACAS willing to help

Settlement Agreement

Direct negotiation:

• Without ACAS involvement
• Employer drafts agreement
• Employee needs legal advice
• Employer pays for advice

Legal requirements:

• Independent legal advisor
• Advice on terms and effect
• Solicitor certificate
• Specific claims waived

When used:

• Before claim filed
• Alternative to ACAS
• More complex terms
• Employer prefers

Consent Order

Through tribunal:

• Agreed terms
• Made tribunal order
• Enforceable by tribunal
• Public record (usually)

When used:

• Claim already at tribunal
• Parties reached agreement
• Want tribunal backing
• Specific circumstances

The Settlement Process

Opening Discussions

How settlement starts:

• Either party can suggest
• Often ACAS initiates
• Solicitor proposes
• After disclosure reveals position

Making first contact:

• "Without prejudice" discussion
• Cannot be referred to in tribunal
• Safe to explore options
• No admission by discussing

Without Prejudice Negotiations

Protected discussions:

• Cannot be mentioned in tribunal
• Free to make offers
• Negotiate openly
• Encourage settlement

Must be marked:

• "Without prejudice"
• "Without prejudice save as to costs"
• On all correspondence
• Both parties must agree

Exception:

• Discrimination or whistleblowing
• May not be protected
• Seek advice

ACAS Conciliation

How it works:

1. ACAS conciliator contacts both parties
2. Each party explains position
3. Conciliator facilitates discussion
4. Separate conversations with each
5. Carries offers between parties
6. Helps find middle ground

Conciliator's role:

• Neutral facilitator
• Doesn't take sides
• Doesn't decide who's right
• Suggests options
• Helps reality testing

Your role:

• Explain your case
• Consider offers
• Make counteroffers
• Decide whether to accept
• Control stays with you

Making and Evaluating Offers

Initial Offers

Employer's first offer usually:

• Lower than they'll pay
• Starting point for negotiation
• Tests your expectations
• Room to increase

Should you make first offer?

• Depends on position
• If strong case, state what you want
• If weak case, wait for offer
• Consider strategically

What to Consider

Assessing an offer:

• Compare to likely tribunal award
• Consider your chances of winning
• Factor in legal costs
• Consider time to hearing
• Weigh stress and uncertainty
• Personal circumstances

Realistic assessment:

• What's your case worth?
• What are your chances?
• What will tribunal likely award?
• What could go wrong?
• Costs vs. potential gain

Calculating Value

Employment compensation:

• Basic award (if unfair dismissal)
• Notice pay
• Holiday pay
• Loss of earnings to date
• Future loss
• Loss of statutory rights (£700)
• Pension loss

Non-financial factors:

• Reference wording
• Confidentiality
• Agreed statement
• Timing of payment
• Tax treatment

Negotiating Tactics

Effective negotiation:

• Don't accept first offer
• Counter-offer if reasonable
• Move incrementally
• Justify your position
• Use ACAS conciliator
• Be realistic
• Know your bottom line

When to compromise:

• Offer is reasonable
• Case has weaknesses
• Costs mounting
• Time pressure
• Other opportunities arising

Settlement Terms

Financial Terms

Compensation amount:

• Lump sum payment
• Payment deadline
• Interest if late
• How much tax-free

Tax treatment:

• £30,000 tax-free for compensation
• Notice pay is taxable
• Holiday pay is taxable
• Must be itemized

Restrictive Covenants

May include:

• Confidentiality clause
• Non-disparagement
• No re-employment
• Return of property

Consider carefully:

• Are they reasonable?
• Do they restrict you unfairly?
• Can you live with them?
• Seek advice if uncertain

Reference Terms

Agreed reference:

• Wording specified
• Who will provide
• To whom provided
• Dates covered

Typical wording:

• Dates of employment
• Job title
• Basic duties
• Neutral statement

Other Terms

May also include:

• Announcement/communication
• Return of documents
• Dismissal of claim
• No re-application clause
• Costs provision

Deciding Whether to Accept

Questions to Ask Yourself

About the case:

• How strong is my case?
• What could I realistically win?
• What are my weaknesses?
• What could go wrong?

About the offer:

• Is it fair and reasonable?
• Can I get more negotiating?
• What's my bottom line?
• Will employer go higher?

About going to tribunal:

• What are my chances of winning?
• Can I afford legal costs?
• Can I handle the stress?
• How long will it take?
• Will I find new job meanwhile?

Pros and Cons

Accepting settlement:

✓ Certain outcome ✓ Quicker resolution ✓ Get money sooner ✓ Avoid hearing stress ✓ Save legal costs ✓ Move on with life

✗ May be less than tribunal would award ✗ No admission from employer ✗ No public vindication ✗ Principle not established

Going to tribunal:

✓ Might win more compensation ✓ Public vindication ✓ Establish the facts ✓ Employer held accountable

✗ Might lose everything ✗ Lengthy process ✗ Stressful hearing ✗ Legal costs ✗ Uncertain outcome ✗ May affect future employment

Getting Advice

Before accepting:

• Discuss with ACAS conciliator
• Consult solicitor if possible
• Reality-check with trusted person
• Don't rush decision
• Sleep on it

Red flags:

• Pressure to accept quickly
• Unreasonable terms
• Significantly undervalues claim
• Unfair restrictions

Formalizing Settlement

Recording the Agreement

COT3 (through ACAS):

• ACAS drafts document
• Records agreed terms
• Both parties sign
• Legally binding
• Claim withdrawn

Settlement agreement:

• Employer's solicitor drafts
• Employee reviews with advisor
• Advisor signs certificate
• Both parties sign
• Legally binding

What Gets Included

Essential terms:

• Amount to be paid
• Payment date
• Tax treatment
• Claims covered/waived
• Confidentiality (if agreed)
• Reference (if agreed)

Also consider:

• Announcement wording
• Return of property
• Restrictive covenants
• Outstanding matters

Withdrawal of Claim

Process:

• Notify tribunal
• Usually by both parties
• Or claimant withdraws
• Claim dismissed
• Cannot be revived

Enforcement

If employer doesn't pay:

COT3:

• Enforceable as contract
• County court action
• ACAS can assist

Settlement agreement:

• Enforceable as contract
• County court action
• Seek legal advice

Common Settlement Mistakes

Don't

• Accept first offer without negotiating
• Rush into settlement under pressure
• Agree without understanding terms
• Sign without reading thoroughly
• Give up too much for too little
• Accept unfair restrictions
• Forget to address reference
• Ignore tax implications

Do

• Take time to consider
• Negotiate if offer reasonable
• Understand all terms
• Read everything carefully
• Get independent advice
• Reality-test your expectations
• Address all issues
• Document everything

Special Situations

Multiple Claims

If claiming several things:

• Consider each separately
• What's each claim worth?
• Settlement should cover all
• Ensure all claims listed

Multiple Respondents

If claiming against several employers:

• Each may settle separately
• Or collective settlement
• Allocate amount between them
• Ensure all covered

Discrimination Claims

Special considerations:

• No cap on compensation
• Injury to feelings
• May be higher value
• Think carefully before settling low

Whistleblowing

Protected disclosures:

• Uncapped compensation
• Public interest element
• Consider implications
• Seek advice

After Settlement

Payment

Ensure payment made:

• By agreed date
• Correct amount
• Check tax treatment
• Keep records

Moving Forward

After settling:

• Claim is finished
• Cannot bring same claims again
• Get agreed reference
• Focus on future

If breach of settlement:

• Employer hasn't paid
• Broken confidentiality
• Other breach
• Seek legal advice

When Not to Settle

Stand Your Ground If

Case is very strong:

• Clear evidence
• Employer clearly wrong
• Likely to win substantially more
• Worth the fight

Principle matters:

• Want public finding
• Important precedent
• Vindication necessary
• Stand up to employer

Offer is derisory:

• Insultingly low
• No realistic negotiation
• Better to proceed
• Call their bluff

Checklist

Before Negotiating

• Assess strength of case realistically
• Calculate potential tribunal award
• Identify weaknesses in your case
• Determine your bottom line
• Consider non-financial factors
• Get advice on reasonable range

During Negotiation

• Mark discussions "without prejudice"
• Don't accept first offer automatically
• Counter-offer if appropriate
• Use ACAS conciliator effectively
• Keep employer engaged
• Be prepared to compromise
• Know when to walk away

Evaluating Offer

• Compare to likely tribunal award
• Factor in legal costs
• Consider time to hearing
• Assess personal circumstances
• Weigh certainty vs. risk
• Review non-financial terms
• Check tax treatment
• Get independent advice

Before Signing

• Read all terms carefully
• Understand what you're giving up
• Check reference wording
• Verify payment terms
• Ensure tax treatment clear
• Check restrictive covenants reasonable
• Get legal advice (if settlement agreement)
• Satisfied with all terms

After Settlement

• Keep signed copy safe
• Monitor payment deadline
• Check payment received correctly
• Obtain agreed reference
• Comply with confidentiality (if agreed)
• Return company property
• Notify tribunal claim withdrawn

Key Principles

Settlement Is Voluntary

• No obligation to settle
• Both parties must agree
• Either can walk away
• Your choice entirely

Most Claims Settle

• Around 70% don't reach hearing
• Usually good reasons
• Certainty valuable to both sides
• Don't see it as weakness

Be Realistic

• Assess your case honestly
• Consider weaknesses
• Tribunal outcomes uncertain
• Bird in hand worth two in bush

Take Your Time

• Don't rush decision
• Pressure tactics suspect
• Sleep on major decisions
• Discuss with trusted advisor

Get It in Writing

• All terms documented
• Nothing agreed verbally only
• Signed by both sides
• Keep copy forever

Settlement offers a way to resolve tribunal claims that gives certainty, saves costs, and allows both parties to move forward. Most claims settle because both sides recognize the value of a negotiated outcome over the uncertainty and expense of a tribunal hearing. The key is knowing when to settle and when to stand firm - and getting the best terms you can.