Settlement agreements: what’s a fair amount for employers to cover in legal costs?
A case in the Employment Appeal Tribunal (Solomon v University of Hertfordshire) recently analysed what a fair contribution for an employer to offer in terms of an employee’s legal costs (for advice on a settlement agreement) would be.
Ms Solomon was dismissed from her employment with the University of Hertfordshire (“the University”) after concerns were raised regarding her timekeeping, sickness absence. and the quality of her work.
Ms Solomon subsequently brought claims in the Employment Tribunal for discrimination, harassment, and victimisation, based on the protected characteristics of discrimination, harassment and victimisation – in all, Ms Solomon pursued 38 separate allegations of discrimination.
Prior to the full merits hearing taking place, the University offered Ms Solomon £50,000 as a without prejudice settlement offer – the University confirmed that Ms Solomon would need to enter into a settlement agreement and that it would cover the cost of the advice on the agreement up to maximum of £500 plus VAT. Ms Solomon was pursuing the claim herself, and she said that enquired with solicitors as to the cost of receiving legal advice; however, she did not instruct a solicitor to advise her on the settlement agreement, and she said that she did not do so because she had been told that the cost of legal advice would be significantly greater than £500 plus VAT.
Ms Solomon rejected the offer of £50,000 and the case went to the full merits hearing, whereupon she lost her claims for discrimination but succeeded with her claim for unfair dismissal. The Employment Tribunal awarded her £1,900 in compensation.
The University made an application to the Employment Tribunal to recoup something of its £122,000 legal bill – it argued, among other reasons, that her refusal of the offer of £50,000 was particularly unreasonable conduct meriting an award of costs.
The Employment Tribunal found in the University’s favour on its application for costs, ordering that Ms Solomon pay a contribution of £20,000 towards its legal costs. The Employment Tribunal held that, among other things, it was unreasonable for Mrs Solomon to fail to take legal advice on the offer of the settlement agreement and, further, for her to turn the offer down.
Ms Solomon submitted an application to the Employment Appeal Tribunal against the award of costs (as well as on liability).
The decision of the Employment Appeal Tribunal
The Employment Appeal Tribunal allowed the appeal in respect of the costs application, holding that Mrs Solomon’s conduct may have been unreasonable, but it was not so unreasonable to warrant an award of costs against her (particularly given that she was a litigant in person).
Was the legal fee contribution for advice on the merits of the settlement agreement and on the claim reasonable?
The EAT also commented on the University’s offer to pay £500 plus VAT towards her legal fees: the EAT stated that it was clear that this fee was to advise Mrs Solomon on the terms and effect of the settlement agreement and that it was “wholly unrealistic” for the University to expect that the contribution of such a sum would be sufficient to allow a solicitor “to advise on the merits of settlement”.
Our solicitors’ comments on the case
Chris Hadrill, the partner in the employment team at Redmans, commented on the case: “This case shows that, among other things, Respondents must be realistic about the level of legal fees that they should pay in order to encourage a litigant-in-person to not only seek advice on the terms and effect of a settlement agreement but also on the merits of any claim – the latter issue will likely take a great deal more time and consideration, and my therefore warrant a higher cost contribution.”
Redmans’ full analysis of the case of Solomon v University of Hertfordshire & anor UKEAT/0258/18/DA can be found here.