Is a contribution to legal costs of £500 + VAT sufficient to enable an employee to take advice on a settlement agreement?
Solomon v University of Hertfordshire
Ms Solomon was employed by the University from 1 November 2010 as an internal auditor.
Throughout her employment, Ms Solomon experienced a number of workplace issues relating to time keeping, absence, performance and flexible working requests.
Matters reached a head and Ms Solomon was dismissed due to her absence and what the University called a fundamental breakdown in the working relationship.
Ms Solomon went on to issue claims for unfair dismissal and, relying on 38 allegations, discrimination, harassment and victimisation. The Respondent offered her £50,000 to settle her claims via a settlement agreement, for which it agreed to contribute £500 towards her taking legal advice on the proposed settlement. Ultimately the Claimant refused the offer. She went on to succeed with her unfair dismissal claim but lost the other claims. She was awarded only £2,000 compensation and ordered to pay the University’s costs in the sum of £20,000 on the basis that she failed to attend mediation and unreasonably refused the offer of settlement.
Ms Solomon appealed the decision.
The Employment Appeal Tribunal upheld Ms Solomon’s appeal on the subject of costs. It found that the Employment Tribunal had based the decision on its own view, rather than considering whether Ms Solomon’s decision to turn down the offer fell within a range of reasonable responses.
The interesting part of the EAT’s judgment is a reference to the University’s proposed £500 contribution towards legal costs. The EAT commented that £500 + VAT is not enough for an employee to take full advice on settling their claim, particularly where the advisor is expected to advise on merits and quantum as well as the terms and effect of the proposed settlement.
The EAT’s comments on an employer’s proposed contribution to legal fees could have the knock-on effect of employees (or their representative) asking for greater contributions towards legal fees when negotiating a settlement agreement.
Employers offering a settlement agreement should remember that, whilst customary, there is no obligation to contribute towards the employee’s legal costs and ultimately whether they do so and how much they offer is a commercial point.
If you have any queries in relation to settlement agreements or any other Employment or HR queries please contact our employment team on 01228 552600 or 01524 548494.