When two parties come to an agreement, particularly in the context of employment disputes, the question often arises: Who pays for the fee for settlement agreement solicitors in drawing up or advising on the settlement agreement?
These agreements, vital tools in resolving disputes, often involve complex legal nuances, making the involvement of a solicitor crucial. This article delves into the dynamics surrounding the fees of a solicitor in such situations.
Understanding Settlement Agreements
Settlement agreements, formerly known as compromise agreements, serve as legally binding contracts that waive an individual's right to make a claim covered by the agreement to an employment tribunal or court. Typically, they come into play during employment terminations, providing the employee with a severance package in return for waiving their rights to bring certain legal claims against their employer.
The Role of a Solicitor in Settlement Agreements
Given the legally binding nature of settlement agreements, it's paramount for the individual (usually the employee) to receive independent legal advice on its implications. A solicitor not only ensures that the agreement adheres to legal standards but also verifies that it is fair and balanced. Their guidance ensures that the party they represent isn't unknowingly giving up significant rights or being shortchanged.
General Practice on Who Pays the Solicitor's Fee
In the vast majority of cases, it's standard practice for employers to offer a contribution towards the legal fees incurred by the employee in seeking advice on the agreement. This practice ensures the agreement's validity, as one of the prerequisites for a legally binding settlement agreement is that the employee has taken independent legal advice.
Extent of Employer’s Contribution
While employers often contribute, the range and amount vary. Factors that might determine the contribution include the complexity of the agreement, the duration of the employment, and the seniority of the employee. However, it's worth noting that while some employers may cover the entire legal fee, others might only pay a part, leaving the employee to cover the remainder.
What Happens If Costs Exceed the Contribution?
There might be instances where the solicitor's fees exceed the employer's contribution. When this happens, unless otherwise negotiated, the employee usually bears the additional cost. It's always wise for the employee to get an estimate from the solicitor upfront to prevent unforeseen expenses.
Special Circumstances & Variations
Like any other contractual negotiation, exceptions and special circumstances can influence who pays the solicitor's fee in a settlement agreement. For instance, if an employee negotiates terms that aren't standard, or if a company has a specific policy in place that differs from general practices, these can alter the norm.
Importance of Clear Communication
Open channels of communication between the employee, employer, and the solicitor are key. Ensuring that there's a clear understanding of who pays what portion of the legal fees, preferably in writing, helps in preventing disputes later on. It's also advisable to have any ambiguities addressed before the agreement is finalised.
Understanding the financial implications and responsibilities surrounding settlement agreements is essential for both employers and employees. While the general practice leans towards employers contributing to the legal fees, variations can occur. Regardless of the situation, it's always beneficial to seek professional advice and maintain transparent communication to ensure that everyone is on the same page.
Additional Resources & Further Reading
For those keen on delving deeper into the intricacies of settlement agreements and related legal fees, consider visiting UK Government's Guide on Settlement Agreements or consulting the ACAS guide on the topic.
With over 10 years of experience in employment law matters, David Philip Harris specialises in providing legal advice on settlement agreements to both employees and employers throughout the UK. David’s opinion and advice are frequently sought after as he contributes often to BBC Radio Berkshire and the People Management Magazine. David Is a long-standing member of The Employment Lawyers Association and The Law Society.