Home Legal Services Employment Settlement Agreements for Employees
Written by:Â Owen John, Employment Law Partner, Darwin Gray | Last updated: 24/10/2026 | Reviewed by: Owen John
A COT3 is a legally binding agreement that records the settlement of an employment dispute reached through ACAS (the Advisory, Conciliation and Arbitration Service). The name comes from the form it used to be recorded on. When an ACAS conciliator helps you and your employer reach terms, usually during early conciliation or after a tribunal claim has started, the deal is written up as a COT3.
Like a settlement agreement, a COT3 is binding: once you’ve agreed it, you’ve settled the dispute and waived the claims it covers. The difference is in how you get there and what the document looks like.
Both achieve the same basic thing, a binding settlement where you give up claims in return for agreed terms (usually a payment). But they’re arrived at differently, and that affects how they work in practice.
| Settlement agreement | COT3 | |
|---|---|---|
| How it’s reached | Drafted directly between you and your employer (and your solicitors) | Reached through an ACAS conciliator |
| Independent legal advice | Legally required for it to be valid | Not legally required (though still wise) |
| Who pays for advice | Employer usually contributes to your legal costs | No automatic legal costs contribution |
| Format | A detailed written contract | A shorter record of agreed terms |
| Level of detail | Usually more detailed, reference, confidentiality, covenants, tax wording | Often shorter and less detailed |
| When it’s used | Can be used at any point, often before a claim is started | Usually during ACAS conciliation or an active tribunal claim |
| Claims covered | Specific claims listed in the agreement | Can sometimes settle claims more broadly, including future ones |
In practice, the two tend to come up at different stages:
So it’s often less a free choice and more about where you are in the process. That said, there are situations where either could be used, and then the differences above start to matter.
There’s no one answer, it depends on what you want and where you are.
A settlement agreement tends to suit you when you want detailed, bespoke terms nailed down, an agreed reference, specific confidentiality wording, careful treatment of restrictive covenants and tax. You also get independent legal advice that your employer usually pays for, which is a real benefit.
A COT3 can suit you when a dispute or claim is already underway and ACAS is involved, when you want something quicker and less formal, or where the broader settlement of claims it can offer is useful. The trade-off is less detail and no automatic contribution to your legal costs.
The honest position is that both are valid, binding routes, and the right one depends on your circumstances. We’ll advise on which fits your situation, and make sure whichever you use genuinely protects you. If you’re weighing up whether to settle at all, our guide on refusing a settlement agreement may help too.
A COT3 is a legally binding agreement that records the settlement of an employment dispute reached through ACAS. It’s typically used during ACAS early conciliation or once a tribunal claim has started, when an ACAS conciliator helps both sides agree terms. Like a settlement agreement, it’s binding and involves waiving claims in return for agreed terms, usually a payment. The main differences are that it’s reached via ACAS and doesn’t legally require you to take independent legal advice.
Both are binding ways to settle and waive employment claims, but they differ in how they’re reached and how detailed they are. A settlement agreement is drafted directly between the parties, requires you to take independent legal advice (usually paid for by your employer), and is typically more detailed. A COT3 is reached through an ACAS conciliator, doesn’t legally require your own solicitor, and is usually shorter. Settlement agreements tend to appear earlier; COT3s during conciliation or an active claim.
Not as a legal requirement, unlike a settlement agreement, a COT3 is valid without you taking independent legal advice. But it’s still wise to get advice. A COT3 is binding and can sometimes settle claims quite broadly, including future ones, so you want to understand exactly what you’re giving up and whether the terms are fair. Signing a binding waiver without advice is a risk, even when the law doesn’t force you to take it.
Neither is universally better, it depends on your situation. A settlement agreement gives more control over detailed terms and comes with employer-funded independent advice, which suits most direct exits. A COT3 can be quicker and less formal and is common once ACAS is involved or a claim has started. Where you are in the process often decides it. We’ll advise on which route fits your circumstances and make sure whichever you use protects you properly.
Whether you’re looking at a settlement agreement, a COT3, or you’re not sure which applies, we’ll explain your options and make sure the terms genuinely protect you. We’re Darwin Gray, one of Wales’ leading employment law firms. You’ll deal directly with your solicitor, and as the only firm in Wales offering full Welsh language employment advice at every level, we can help in Welsh or English.
Get a free, no obligation chat with our employment team. Call 02920 829 100 or use our contact form.
Settlement agreements for employees
Refusing a settlement agreement
Negotiating a settlement agreement
Disclaimer: This guide is general information, not legal advice, and employment law changes. For advice on your situation, please speak to a qualified employment solicitor.
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