ACAS settlement discussions can help employers resolve workplace disputes before they become longer, more expensive and more disruptive.
Settlement discussions may arise before an employment tribunal claim, during ACAS early conciliation, or after a claim has already been issued. For employers, the aim is usually to resolve the dispute on clear terms and avoid the time, cost and risk of a contested claim.
However, employers should not treat settlement discussions casually. What is said, how the offer is made, and how any agreement is recorded can all affect the employer’s position.
What are ACAS settlement discussions?
ACAS settlement discussions usually involve an ACAS conciliator speaking separately to the employer and employee, or former employee, to see whether an agreement can be reached.
The conciliator does not represent either side and does not decide the case. Their role is to help the parties explore whether the dispute can be resolved without a tribunal hearing.
Settlement discussions can happen during early conciliation or after a tribunal claim has been made. In either situation, employers should take time to understand the claim and assess the risks before making or rejecting an offer.
When might employers consider settlement?
Settlement may be worth considering where the employer wants to avoid the cost, uncertainty and management time involved in defending a claim.
It may also be sensible where the documents are weak, witnesses may be unavailable, a process was not followed properly, or the commercial cost of defending the case may outweigh the value of the dispute.
Settlement does not always mean the employer accepts wrongdoing. In many cases, it is a commercial decision to bring a dispute to an end.
However, employers should not settle automatically. Some claims should be defended, especially where the employer has a strong case or where settlement could encourage further weak claims.
Review the facts before making an offer
Before entering ACAS settlement discussions, employers should review the facts carefully. A rushed offer may be too high, too low, or made without understanding the full risk.
Employers should check:
- what claim or potential claim is being raised
- what documents support the employer’s position
- whether any procedure was followed correctly
- whether there are discrimination or whistleblowing risks
- what compensation might realistically be claimed
- whether insurance cover applies
- how much management time a defended claim may take
This assessment helps employers decide whether to make an offer and what level of offer may be sensible.
Be careful with wording
Employers should be careful with the language used in settlement discussions. A settlement proposal should usually be framed as an attempt to resolve the dispute, not as an admission that the employer has acted unlawfully.
Managers should avoid emotional, defensive or aggressive language. Poor wording can make the dispute harder to resolve and may damage the employer’s position.
Where settlement discussions are being handled through ACAS, employers should keep communications clear and focused. If there is uncertainty about what should be said, legal advice should be taken before making an offer.
Understand confidentiality and protection in ACAS Settlement Discussions
Settlement discussions can sometimes be confidential or protected, but employers should not assume that every conversation is automatically protected in every type of claim.
ACAS explains that settlement discussions are sometimes called protected conversations. It also explains that some discussions may be protected under the without prejudice principle. These are important concepts, but they have limits.
For example, protection may not apply in the way an employer expects if there is improper behaviour, or where certain types of claim are involved. Employers should therefore avoid saying anything they would not want scrutinised later.
COT3 agreements and settlement agreements
If agreement is reached through ACAS, the terms may be recorded in a COT3 agreement. A COT3 is a binding settlement reached through ACAS conciliation.
In other situations, the parties may use a settlement agreement. ACAS guidance explains that settlement agreements can be used to settle a dispute or legal claim, and can also be used to end an employment relationship.
Employers should make sure the correct document is used and that the wording covers the claims being resolved. Poorly drafted terms can lead to later arguments about what has, and has not, been settled.
What should employers include in settlement terms?
The right terms depend on the dispute, but employers should usually consider:
- the settlement payment
- when payment will be made
- which claims are being settled
- whether employment is continuing or ending
- notice pay, holiday pay and salary owed
- confidentiality wording
- return of company property
- references or agreed announcements
- withdrawal or non-pursuit of any claim
- tax treatment where relevant
Employers should not rely on vague wording such as “full and final settlement” without checking that the agreement properly covers the intended claims.
Check insurance before agreeing terms
If the employer has tribunal insurance or legal expenses cover, the policy should be checked before any settlement is agreed.
Some policies require insurer approval before settlement discussions, offers or payments are made. Others may require early notification when the dispute first arises.
Failing to follow policy conditions may affect cover. Employers should check this early, especially where the claim could become costly.
Do not ignore the wider workplace issue
Settlement may end the individual dispute, but it may not fix the underlying workplace problem. Employers should consider whether the dispute revealed gaps in contracts, policies, procedures, management training or record keeping.
For example, a dispute about dismissal may reveal problems with disciplinary procedures. A dispute about pay may reveal unclear contract terms. A grievance may show that managers need better guidance on workplace complaints.
After settlement, employers should consider whether internal documents or practices need improving.
Practical steps for employers with ACAS Settlement Discussions
Before and during ACAS settlement discussions, employers should usually:
- understand the claim or potential claim
- review the facts and key documents
- assess compensation and legal risk
- check insurance cover
- decide who will speak to ACAS
- avoid making admissions unnecessarily
- record offers and responses clearly
- ensure any agreement is properly documented
- review whether workplace procedures need updating
Getting ACAS settlement discussions right
ACAS settlement discussions can be useful for employers, but they need careful handling. A well-managed discussion can resolve a dispute quickly and reduce legal cost. A poorly handled discussion can create confusion, increase hostility or leave gaps in the final agreement.
Employers should approach settlement discussions with a clear understanding of the facts, the risks and the outcome they are prepared to accept.
Employers Law helps employers deal with ACAS settlement discussions, early conciliation, tribunal risk and settlement terms. If ACAS is involved in a workplace dispute, early advice can help protect the business.
For practical help with settlement discussions, visit our settlement agreement discussions page. For wider support, Employers Law also provides free employment law advice for employers across a full range of workplace issues.