A council could be facing a payout of hundreds of thousands of pounds after an employment tribunal was settled out of court.
Peterlee Town Council clerk Jane Russell made a claim against her employer which was due to be heard at an employment tribunal this week.
The case was transferred from Newcastle to Manchester Tribunals Court but was settled before the hearing was held.
It has been reported that the case will cost the authority £200,000 to settle and that the council will face a further £100,000 bill for legal costs.
Coun Mandy Thompson, a Labour representative of the Passfield ward, says allegations she was bullying Ms Russell have put her through two years of hell.
She said the tribunal originally came about after she questioned Ms Russell’s salary while she was on sick leave from work.
Coun Thompson says she began asking questions over the level of pay for Ms Russell while she remained off work.
She said: “This is when the bullying allegations started. I’ve had to hire a barrister and it’s left me thousands out of pocket. I didn’t bully her.
“But now I’m being bullied. I’ve been shouted at in the street, received anonymous letters and phone calls, my husband has been threatened and people have been at my parents’ door shouting as well.
“It’s absolutely dreadful. It’s been two years of hell and I’ve even had a letter from my GP saying that I shouldn’t go back there.”
Allegations were also made against former mayor Coun Bill Jeffrey, a Labour representative for the Dene House ward, but he declined to comment.
Peterlee Town Council also declined the opportunity to comment on the case.