An employees legal fees for the independent legal advice on a settlement agreement is normally paid by the employer. Usually, the only time that practice is ever questioned by the employer is where negotiations break down and no settlement agreement is ever entered into. In those circumstances, there is no legal obligation upon the employer to pay the legal fees. It was a recommendation in the report entitled, 'The Use of Non-Disclosure Agreements in Discrimination Cases' published by the House of Commons Women and Equalities Committee on the 11th June 2019, that it should be compulsory for the employer to pay for the employees legal fees for the advice on a settlement agreement, regardless of whether the settlement agreement is ultimately entered into and concluded. However, that recommendation was rejected by the Government in its response to the report on the 29th October 2019. In its response, the Government stated: "Employers do frequently pay for the independent legal advice received by an individual before a settlement agreement and we believe employers should contribute appropriately. However, it would not be correct or feasible for the Government to dictate the parameters of this payment as it may vary according to geographical location, case, legal availability and client requirements."
There have been two further developments on the issue of legal fees in relation to advice on a settlement agreement since the Government's response: the Equality and Human Rights Commission's (EHRC) guidance on the use of confidentiality agreements in discrimination cases, and the decision by the Employment Appeal Tribunal (EAT) in the case of Solomon v University of Hertfordshire and another (2019).
Legal Fees On Advice On A Settlement Agreement: EHRC Guidance
In its guidance on the use of confidentiality agreements in discrimination cases from October 2019, the EHRC state that in relation to the legal fees for the advice on a settlement agreement, the employer should pay those costs regardless of whether the settlement agreement is ultimately entered into by the employee or not. The EHRC state: "The employer should pay the worker’s costs even if, having received the advice, the worker ultimately finds the terms unacceptable and reasonably decides not to sign the agreement." However, as the EHRC guidance is no more than guidance on best practice, it does not constitute a legal obligation upon the employer to pay the legal fees for the advice on a settlement agreement in the event that no agreement is concluded.Â
Solomon v University of Hertfordshire and another (2019)
In the case of Solomon v University of Hertfordshire and another (2019) (UKEAT/0258/18/DA & UKEAT/0066/19/DA), the EAT held that whilst £500 plus VAT may be sufficient to cover an employees legal fees where the employee required no more than having the terms and effect of the settlement agreement explained to them, it was "wholly unrealistic" according to the Court in terms of covering the employee for receiving advice on the merits and value of a potential employment tribunal claim. Nevertheless, this view by the EAT was expressed in the context of an employers costs application, and does not now mean that an employer is under a legal obligation to pay the employees legal fees for advice on a settlement agreement in the event that no agreement is concluded. Nevertheless, should an employer offer to make a contribution towards the employees legal fees for the advice, but that offer is not sufficient to cover all of the employees legal fees, then given what the EAT has said in the Soloman case, that is likely to undermine any later costs application by the employer in the employment tribunal.Â
