Key takeaways
COT3 settlements must be objectively interpreted
Focus is on wording, not parties’ intention / state of mind.
Broad wording covers all existing claims
Express settlement of tribunal claim also settled the related appeal.
Clear drafting desirable
Disputes can arise from unclear drafting.
Where an agreement to settle an employment claim is reached via Acas, the conciliation officer will prepare a written agreement (known as a “COT3”). Although COT3s are often drafted more simply than a formal settlement agreement would be, they have a similar binding legal effect on the settlement of the claim(s). The EAT recently considered whether a COT3, which did not expressly reference an ongoing related appeal to the EAT, precluded the claimant from pursing that appeal.
Factual background
T, a mortgage adviser, had been on a lengthy sickness absence and had been receiving payments under his employer’s Permanent Health Insurance (PHI) scheme. T had been notified that those PHI payments would end shortly but he considered that he was entitled to continue to receive them for a further six months. T brought a claim (ETC1) in relation to the alleged non-payment of PHI payments, which was later dismissed after he withdrew the claim. Around a month later, T issued a fresh employment claim (ETC2), relating to unpaid PHI payments, unpaid employer’s pension contributions and disability discrimination. The employment tribunal struck out the part of ETC2 which related to unpaid PHI payments, applying the ‘res judicata’ principle (that a point already litigated cannot be re-litigated), but this left T’s other claims to proceed. T appealed to the EAT against the strike out of his claim relating to the unpaid PHI payments.
The parties later negotiated via Acas and entered into a COT3. Under this agreement, the employer paid £18,500.00 to T in exchange for the withdrawal of ETC2 and “in full and final settlement of any and all claims which [he] has or may have…” (subject to a few exclusions, which are not relevant). There was no express mention in the COT3 of the ongoing EAT appeal proceedings. The EAT proceeded to list T’s appeal for a full hearing. The employer argued that the COT3 meant T’s EAT appeal should no longer proceed. A preliminary hearing was fixed for the EAT to determine the effect of the COT3 on T’s appeal.
EAT decision
The EAT held that the words used in the COT3 should be interpreted objectively; the subjective states of mind of the parties at the time the agreement was entered into are irrelevant to that interpretation.
Here, the wording of the COT3 made it clear that, in exchange for the settlement payment, the employer was entitled not just to the withdrawal of ETC2 but also the full and final settlement of any claims which T had or may have against it. This was subject only to what was expressly excluded (which did not include his EAT appeal). This wide wording, given its ordinary meaning, embraced T’s PHI claim that had been struck out and was the subject of the ongoing appeal to the EAT.
Where the words of a settlement agreement, when objectively construed, settle a claim which has been struck out then it is the natural and logical implication that any ongoing related appeal is also settled.
In any event, the COT3 rendered T’s EAT appeal wholly academic because, as ETC2 had been settled, it could not lead to it being reinstated or adjudicated upon.
