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Employment Law Update - Settling an Employment Tribunal Claim

Principles are all very well, but they can be seriously expensive and thus, irrespective of the rights and wrongs of the matter, the majority of employment tribunal claims are settled in order to avoid the stress and expense of attending a hearing.

Settling a claim is not an admission of liability, but respondents often make commercial decisions to settle claims to keep costs as low or controlled as possible. Even where a claim is completely without merit in reality it is cheaper to settle the claim than to fight it. Other times respondents try to settle claims which are high risk and when they know their defence is weak.

Going to court is expensive. Even if you’re staggeringly rich (think of Russians Boris Berezovsky who accused fellow tycoon Roman Abramovich of betraying and blackmailing him, and brought a multibillion dollar lawsuit over an oil deal this week) going to law is unpredictable and costly.

In employment terms it usually pays to settle .Some 80% of tribunal applications are settled or withdrawn. However, it does happen in about 20% of cases (especially in large companies where not fighting acts as an ‘open chequebook’) that the employer decides to defend a claim, even where the costs of preparation and presentation are more than the value of claim itself.

Where claims are settled, respondents face the risk of employees finding out that a sum of money has been paid to the claimant. This likelihood of this happening can be reduced by inserting a confidentiality clause in a settlement agreement. Agreeing to settle an employment tribunal claim is not just a matter for financial consideration.

The claimant can also benefit from an agreed employment reference as part of the settlement. Respondents usually want a confidentiality clause in the agreement and a statement to say that the claimant will be required to repay the settlement sum on breach of any terms of the settlement. Settlements can be reached via compromise agreements or through ACAS COT3 agreements.

ACAS offers a conciliation service which is aimed at helping both parties find a way of settling the claim. The service is free and is available to both parties. Claims which are settled before a hearing should then be withdrawn. The advantage of settling a claim through ACAS is that even just a verbal agreement is legally binding and ACAS will inform the Employment Tribunal of any cases settled in this way.

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