What is an unfair dismissal settlement agreement?
An unfair dismissal settlement agreement is a legally binding contract between an employer and an employee. It resolves any disputes related to the employee’s claim of unfair dismissal. Employees who have been employed continuously for in excess of two continuous years can raise a claim of unfair dismissal. They can challenge the termination of their employment.
When an employee is dismissed and has not completed two years of continuous service with the same employer, they are not protected by ‘fair reasons’ as per the Employment Rights Act 1996.
An unfair dismissal settlement agreement claim is a statutory claim for loss of salary together with a basic award which is equivalent to statutory redundancy pay.
How much compensation can you get for an unfair dismissal settlement agreement claim?
The sums of money which can be claimed in an unfair dismissal settlement agreement claim relates primarily to their loss of salary. This means that those employees that secure a job quickly will recover less than those who are out of work long-term following their dismissal.
An unfair dismissal settlement agreement claim has to be filed by the employee within three months of the date of the termination of employment. An employee may contact ACAS which is the advisory conciliation service to arrive at an agreement for severance with their former employer.
An employee is required to draft a form ET1 and file this together with his or her particulars of claim at the Employment Tribunal closest to his or her usual place of employment.
One way of settling an unfair dismissal settlement claim is when an employee and an employer enter into an agreement known as a settlement agreement.
What’s the difference between a COT3 and a settlement agreement?
An alternative to a settlement agreement is known as a COT3 agreement.
In both cases, whether a settlement agreement is entered into or a COT3 is agreed upon, the employee must relinquish their rights. They will no longer be able to pursue the unfair dismissal claim in the Employment Tribunal.
The employee will typically be awarded a sum of money as compensation within the settlement agreement. This is a consideration for his or her agreement to waive the entitlement to continue with the claim of unfair dismissal.
The employee entering into the COT3 agreement, or the settlement agreement, should seek legal advice on the terms of that agreement prior to signing it.
It is a legal requirement for the individual to seek legal advice on the terms of a settlement agreement otherwise that agreement will not be enforceable. There is no legal requirement for an employee to seek advice on the terms of a COT3 agreement which is enforceable whether or not legal advice is sought.
It is always wise for individuals entering into a COT3 or a settlement agreement to seek legal advice, even if it is not required. Consulting a lawyer helps to ensure that the rights being waived are appropriate given the specific circumstances of their case.
Employment Tribunal claims
Unfair dismissal settlement claims are by far the most common claims that are seen in the Employment Tribunals of England and Wales.
To win an unfair dismissal claim under a settlement agreement, an employee must demonstrate that their employment termination was unreasonable. This requires proving that the employer’s decision to dismiss did not fall within a reasonable range of responses. The employer’s process which was followed prior to the dismissal may have been flawed. Alternatively, it could be where the dismissal itself was substantively unfair.
In the event the process was unfair, the employee is at liberty to argue that a proper process was followed. Then a fair dismissal would have taken place.
In that event, an employer may be able to argue a reduction in damages is appropriate and this is known as a Polkey defence.
Constructive unfair dismissal claim
One type of unfair dismissal is constructive unfair dismissal. This is where an employee chooses to resign due to the employer’s poor behaviours. They argue that his or her dismissal has been forced by those poor behaviours.
A constructive unfair dismissal claim is more difficult and comparatively less likely to succeed than an ordinary unfair dismissal claim brought in by the Employment Tribunal.
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