How and when to settle an employment claim

There are many reasons why you might not want to settle an employment claim, and if you’ve done nothing wrong why should you? But sometimes it is a simple business decision. So, if there is no sense in putting the business through a long drawn out dispute, how do you go about resolving it?

Most employers have probably never faced an employment tribunal claim, and for others it is a very rare occurrence. It isn’t surprising that many businesses are shocked and worried when they receive the employment tribunal claim documents, but it doesn’t mean they have done anything wrong, and there is usually no reason to panic.

Ex-employees generally have nothing to lose by issuing an employment tribunal claim. They can represent themselves and access quite a lot of free guidance and support in the process. Sadly, it is also common knowledge that defending a claim, even successfully, will usually cost a business money that they cannot recover.

Every time a business faces an employment tribunal claim, it needs to consider whether it is worthwhile defending it. There will always be a cost, but the business will need to weigh up the various risks and costs and decide whether to fight, or to settle. Settlement is often a commercial/financial decision and should not be viewed as an admission of guilt. There is no stigma to settlement. But, equally, businesses will not want to get a reputation as a soft touch by settling too easily (especially if they have a large workforce), and there are often good reasons to fight your corner.

In terms of settlement opportunities, there are usually three or four stages to an employment dispute:

Grievance or Letter of Claim

Usually the first indication of a potential claim will be an employee expressing that they feel aggrieved or that they intend to take legal action, whether in the form of a workplace grievance or an appeal against dismissal, etc.

This is an opportunity for a business to rectify mistakes or resolve a dispute when there is an acknowledgment that something did in fact go wrong. However, it is generally not a good time to enter into settlement negotiations when you haven’t done anything wrong – because it makes you look as though you have, and settlements can be more expensive as a result.

Sometimes, this will be followed by or replaced with a letter of claim. This usually comes from a lawyer, and suggests that terrible things (an employment tribunal claim) will happen if you don’t settle. Unlike other civil claims, there is no need for you to respond to such an approach unless you actually want to settle the claim at this stage, but there are often advantages in stating your position in reply and you won’t want to leave open accusations left unanswered.

It isn’t necessary for an employee to do either of these things, and they could just go straight to the next stage, which is ACAS Early Conciliation.

ACAS Early Conciliation

Before lodging a formal employment tribunal claim, the employee will generally need to approach ACAS. A four-week conciliation period will usually follow, but there are often delays in ACAS contacting the employer to discuss potential resolution.

This is a good opportunity to settle a claim before formal legal proceedings are issued, and uses a simplified settlement agreement and process potentially saving some legal costs.

Unfortunately, delays may mean that you have far less than four weeks of early conciliation, and many businesses will ignore the approach from ACAS, so there are often missed opportunities at this stage.

If settlement is not achieved until after the close of the early conciliation, ACAS will normally still facilitate a settlement before a claim is issued if you continue to negotiate and reach agreement, because ACAS are also under an ongoing statutory obligation to continue to conciliate once the claim has been issued anyway.

In any case, there will still be opportunities to settle the claim after formal legal proceedings have been issued.

Sometimes an employee will ask ACAS not to contact their employer, in which case a formal notice of an employment tribunal claim may be the first you hear about it.

Employment Tribunal Claim

The most important thing not to do when you receive the employment tribunal claim notice is to ignore it, even if you think it is mistake. Read the letter from the employment tribunal, and take note of the date. You will only have 28 days from when it was sent to you to submit your formal “response”.

It normally takes some time for an employee to prepare and lodge a formal claim, and then it needs to pass through the employment tribunal administration system, before it is sent out to you. Once it has been sent to you, you have the four weeks in which to lodge a response. This provides you with another short settlement window during which legal costs are still lower, but you must ensure that you do lodge your response in time (if you don’t reach a settlement first).

Unfortunately, I have seen too many cases of businesses not responding to the claim in time, or at all, because they didn’t think they needed to, or because they lost it in a pile of paper. That then puts you in the worst position possible.

In many cases, it is better to submit your formal response, and then negotiate a settlement after. This can put you in a stronger negotiating position, and may allow settlement for a lower value. You may even decide that settlement is not the best option, and resolve to fight/defend the claim. It does remain possible to settle a claim at any stage during the employment tribunal proceedings, but your legal costs will increase as time goes on.


Sometimes you know that there is going to be a claim, and other times it can take you completely by surprise, but you do have a number of opportunities to consider how best to deal with the claim, and to potentially settle it if you want, so there is no need to panic or feel rushed when you are put on notice of an employment claim. But you should take advice and get your representatives involved as early as possible, so that they are prepared to support you and guide you through the process.

(The content of this article is not intended to be specific legal advice)