ACAS Conciliated Settlements - Watch the Wording

When the settlement of an employment dispute between an employer and an employee is negotiated through the Advisory, Conciliation and Arbitration Service (ACAS), the terms of the settlement are formally recorded on a COT3 agreement form. The Employment Appeal Tribunal (EAT) has ruled that a COT3 agreement must contain precise language if its aim is to preclude claims arising from events that occur after it is entered into (McLean v TLC Marketing plc).

Ms McLean resigned from a senior management job with TLC Marketing (TLC) in May 2007 and brought Employment Tribunal (ET) proceedings alleging breaches of the Equal Pay Act 1970, unlawful sex discrimination and victimisation. In April 2008, the parties entered into a settlement with the assistance of ACAS. The terms of the COT3 agreement stated that, without any admission of liability, TLC would pay Ms McLean £28,000 and provide her with an open reference. Ms McLean agreed to accept the sum of money in full and final settlement of her ET claims against TLC and of ‘any other claim whatsoever arising out of or connected with her employment with the Respondents and its termination’.

However, TLC failed to pay the full amount and did not give Ms McLean the agreed reference. She went to court to recover the money due to her, after which this was paid and the reference provided.

Ms McLean then brought a further ET claim, alleging victimisation. She contended that she had been subjected to a detriment because TLC had failed to comply with the terms of the COT3 agreement, which she claimed was because she had brought proceedings against them under the Sex Discrimination Act 1975.

The ET held that the COT3 agreement removed its jurisdiction as it compromised all claims arising out of or connected with Ms McLean’s employment and its consequences.

Ms McLean appealed against this decision. Her argument was that the agreement she had entered into with TLC did not preclude future claims which were not contemplated by the parties at that time. It did not settle a fresh claim arising from events that took place after the agreement had been made. TLC, on the other hand, put great store on the inclusion in the agreement of the word ‘whatsoever’, which they contended indicated that the parties intended it to preclude all claims arising out of the events after as well as before the date of the agreement.

The EAT allowed the appeal. Whilst it is possible for a COT3 agreement to waive all claims, whether they are known about or not, language that makes it absolutely clear that this is the intention of the parties to the agreement would be required in order to achieve this result. In this case, the wording of the COT3 did not lend itself to such a construction. Ms McLean’s victimisation claim was therefore remitted to the ET for consideration on its merits.