This guide is maintained as a current resource for September 2026 and covers only the laws of England and Wales. Information is for general guidance, not legal advice. Consult a qualified solicitor for advice specific to your situation.
Comprehensive guide to settling employment tribunal disputes before a hearing, covering early conciliation with Acas, settlement agreements, COT3 formalisation, negotiation steps, timing and practical considerations for employees and employers.
Settling a dispute before it reaches an employment tribunal hearing is a common and often beneficial outcome for both parties. Settlement can save time, reduce costs, control outcomes and preserve working relationships. Employment disputes can be resolved informally by agreement or through structured pre‑tribunal mechanisms such as Acas early conciliation and COT3 agreements. This article explains how settlement works, legal frameworks, key processes, timing, practical considerations, common pitfalls and answers to frequently asked questions.
Why Consider Settlement
A settlement is an agreement between a claimant and respondent that resolves all or part of a dispute before a tribunal hearing. Settling means a formal tribunal hearing may be avoided altogether, saving legal costs, reducing stress and giving both sides greater control over the outcome. Settlement can occur at any stage in the process - before a claim is issued, during early conciliation, after a claim is lodged and even up to the day of a hearing.
According to official data, a substantial proportion of employment disputes do not proceed to a tribunal hearing because they are resolved beforehand, with many agreements reached through conciliation. Around 74 % of cases that did not progress to an employment tribunal hearing following early conciliation were settled or otherwise resolved in the first half of 2025, showing how common settlement outcomes are.
Early Settlement Mechanisms
ACAS Early Conciliation
Before most claims can be submitted to an employment tribunal, claimants must notify Acas (Advisory, Conciliation and Arbitration Service) of their intention to claim. Early conciliation offers a structured opportunity to negotiate a settlement without beginning formal litigation.
- Free and confidential. Acas does not charge for the service and keeps information confidential.
- Voluntary. Both parties choose whether to engage in settlement discussions.
- Mandatory before claim. For most claims, you cannot issue a tribunal proceeding without first obtaining an early conciliation certificate.
During early conciliation, an Acas conciliator contacts both parties, outlines the points of dispute and relays offers between them. Settlement through this process avoids tribunal entirely and is often the most cost‑effective route.
From 1 December 2025, the maximum early conciliation period will extend from six to 12 weeks, giving more time for meaningful settlement discussions.
Settlement Offers and Without Prejudice Negotiations
Parties can also negotiate settlement outside Acas, or before early conciliation begins, by exchanging offers. Offers must typically be made “without prejudice” to protect the content of negotiations from being disclosed or used in tribunal proceedings if talks fail. “Without prejudice” status encourages frank negotiation by preventing admissions or negotiation positions from being used against either side at a hearing.
Legal Agreements and Documentation
COT3 Agreements
When settlement is reached through Acas conciliation - whether early conciliation before a claim or conciliation after a claim is lodged - it is usually formalised using a COT3 agreement. A COT3 is a legally binding contract that sets out the terms of the settlement, such as:
- compensation to be paid;
- dates by which payments or actions must be taken; and
- any other operative terms agreed between the parties.
Both parties sign the COT3 and it becomes enforceable; once signed, neither side can return to the tribunal to litigate the same matters covered by the agreement.
Settlement Agreements
Settlement agreements under section 111A of the Employment Rights Act 1996 are another form of pre‑claim resolution. They differ from COT3 in that they often include independent legal advice requirements for the employee and broader terms covering multiple claims. Settlement agreements can be used to resolve issues before any tribunal process is initiated and often include clauses preventing future claims on specified matters.
To be enforceable, these agreements must be in writing and the employee must have received advice from an authorised independent adviser (for example, a solicitor or certified union official).
When Settlement Can Occur
Settlement is possible at multiple stages of the tribunal process:
Before a Claim Is Filed
Early negotiation through Acas early conciliation or direct settlement offers can resolve a dispute before any tribunal paperwork is lodged. This approach preserves options and often reduces costs for both sides.
After a Claim Is Filed
Even if a claim is formally lodged, settlement remains possible. Once a claim is submitted, conciliation continues to be available through Acas, and parties can continue to negotiate up to the point of hearing or even during the hearing process.
Up to Final Hearing
Parties can make offers to settle as late as the day of the final hearing itself. Tribunal judges may even encourage settlement discussions during procedural hearings or at preliminary stages such as judicial mediation.
Practical Steps to Negotiate Settlement
1. Assess Your Case and Objectives
Before negotiating, evaluate what you want from settlement - for example, compensation, references, notice pay or other outcomes. A realistic understanding of strengths and weaknesses helps frame proposals that the other party may accept.
2. Start With a Formal Offer
A written offer - ideally labelled “without prejudice” - sets a tangible starting point. It communicates seriousness and can anchor further negotiations.
3. Use Early Conciliation Proactively
Engaging with Acas early can provide an intermediary to facilitate offers, relay responses and suggest realistic settlement frames. Even if early conciliation upgrades to post‑claim conciliation, the same conciliator may assist the discussion.
4. Document Terms Clearly
Once an agreement is reached, ensure that all terms - financial amounts, payment dates, tax status of payments, references, confidentiality clauses and any non‑disparagement obligations - are set out in a written agreement such as a COT3 or settlement agreement.
Potential Risks and Considerations
Binding Effect
A settlement agreement or COT3 that covers specific claims usually prevents the claimant from pursuing the same issues at tribunal later. Carefully consider whether all potential claims are intended to be covered by the agreement before signing.
Independent Advice
Some settlement agreements require the claimant to have independent advice for legal validity. It is prudent to secure such advice even where not strictly required (for example with COT3) to ensure informed consent and understand tax and employment rights implications.
Timing and Strategy
Settling too early without fully evaluating your case's value can lead to inadequate compensation. Conversely, delaying negotiation might increase costs, stress and risk of adverse outcomes at hearing.
Common Questions
Is settlement compulsory?
No. Both parties must agree to settle; either party can refuse negotiation and proceed to tribunal. Early conciliation and settlement discussions are voluntary processes.
Does settlement protect against future claims?
A final and properly drafted agreement will typically prevent claims covered by the agreement from being pursued later. However, unrelated claims may still be possible unless explicitly covered.
Can settlements be enforced?
Yes. COT3 agreements and settlement agreements are legally enforceable. If one party fails to comply, the other may seek enforcement through the courts or Acas intervention in the case of COT3.
Key Takeaways
Settlement before a tribunal hearing is a widely used and practical way to resolve employment disputes in England and Wales. The Acas early conciliation process is a mandatory and valuable first step that offers a structured framework for negotiation. If settlement is reached, it is formalised in legally binding agreements such as COT3 or settlement agreements, avoiding the need for a hearing. Parties can also negotiate directly or through offers marked “without prejudice” at any stage up to the hearing. Understanding the processes, options, risks and proper documentation helps claimants and respondents achieve fair and enforceable outcomes while minimising legal costs and stress.
