The most common method of settling an Employment Tribunal claim is via ACAS, using a document called a COT3.
COT3s will almost always contain a confidentiality clause preventing the employee/former employee from telling people they have received a settlement or how much they have received. There are sensible commercial reasons why this is necessary for an employer, including that they would not want others to bring claims in the hope of also getting a payoff.
What if the employee/former employee breaches the confidentiality clause? Can the employer reclaim monies paid or refuse to pay any further monies due? A recent High Court case considered this point.
In Duchy Farm Kennels V Steels, the High Court the former employee breached a confidentiality clause contained in a COT3, disclosing details of the settlement to a former colleague. The sum payable under the COT3 was £15,500 but unusually it was to be paid via 47 weekly instalments of £330. At the time of the breach of confidentiality, only £2960 had been paid. The employer ceased any further payments, relying on the breach.
The employee sued the former employer for the failure to make the settlement payments due under the COT3.
What is a COT3?
A COT3 is a legally binding agreement to settle any actual or potential claims in the Employment Tribunal and prevents an employee from pursuing or continuing claims in the Employment Tribunal. The purpose of a COT3 is very similar to that of a settlement agreement, though the wording tends to be more concise.
A COT3 will only arise where ACAS have conciliated a settlement in connection with a claim or potential claim.
The legal issue was whether the confidentiality clause was a condition of the contract. This can be achieved by expressly stating that it is, by the wording making it clear that a breach of that term entitled the other party to terminate the contract or because of the general construction of the contract i.e. looking at everything in the round, the parties clearly intended it to be a fundamental condition of entering into the contract.
In this case, the COT3 did not expressly state that confidentiality was an express condition of the COT3. Both the County Court and High Court agreed that whilst there had been a breach of confidentiality, the confidentiality provision itself was not a ‘condition’ of the COT3. The Court found that the confidentiality clauses were ‘boilerplate’ clauses and found in favour of the employee, stating that the employer was not entitled to cease payments under the COT3.
Where confidentiality is of key importance to an employer settling claims, it is important that the wording of the COT3 or settlement agreement makes this clear. Ideally, the relevant document should specify that the confidentiality is an express condition and breach entitles the employer to terminate the contract.
If you have any queries in relation to Employment Tribunal claims or settlements, please contact us on 01228 552600 or 015242 548494.