The purpose of this study was to investigate client perspectives on the process of bringing an employment claim and the funding arrangements used to bring such claims. Concentrating on the employment arena allowed us to look at how clients perceive the controversial and comparatively unregulated damages-based contingency fees but also to cover issues with three other funding arrangements often used in employment tribunals: private payment, trade unions and LEI. Lack of choice is a theme running through many sections of this report. In particular, claimants did not have any choice of lawyer (because LEI or TU funders preclude it), or were not able to make an informed choice between different lawyers or funding models. Knowledge about alternatives appeared worryingly low.
Tackling this lack of knowledge is difficult. The solicitors’ profession imposes obligations on its members to advise on alternative funding arrangements but we found little evidence that these were honoured. This breach is particularly important where solicitors are effectively tied to one form of funding. These solicitors have a potential conflict of interest. There is a real risk that clients are not being properly counseled on the funding options available to them and that this absence is being driven, in part, by solicitors’ self-interest in charging for clients on their preferred basis. Each funding arrangement has pros and cons which are complex and contested. Unsurprisingly, clients have limited
understandings of their fee arrangements. These concerns are worrying generally, but are of particular concern when the client, rather than a trade union or a legal expenses insurer, is footing the bill.
In our previous report93 we commented on the diverse approaches to charging for VAT and extra costs, particularly disbursements under DBCF agreements. This is a particular issue in the context of DBCFs, where clients seemed to expect to be charged a percentage if they win and nothing if they lose, and yet found themselves either paying a percentage plus disbursements (and not uncommonly VAT on top of that) or find out that the ‘no fee’ if they do not win may in fact require payment of other expenses. We found evidence of consumer disquiet about this, but not evidence of outrage. There is a submissive culture amongst clients which seems to mean that they accept such surprises as part of the legal system, or something to be borne as a recipient of legal help ‘for nothing’.
There are arguments to be made in terms of allowing firms the flexibility to impose such charges. It enables the lawyers to offset some of their risk and may mean that they are more willing to take certain cases, thus potentially widening access to justice. The justifications for permitting a variety of models depend, in our view, on transparency and client choice. If clients can make an informed choice between different models, then the apparently negative impacts of certain charging models are easier to justify. The almost total absence of any active or informed choice by the claimants raises significant doubts about the desirability of allowing such charging practices. The Solicitors Regulation Authority, the
Ministry of Justice as regulators of Claims Management Companies, and if needs be the Legal Services Board need to actively consider the permissible approaches to charging in such areas. The case is particularly
strong in relation to VAT but applies equally to other charges such as disbursements. Firms could, should, and many do, bear these as part of their assessment of risk in taking on cases where they are rewarded by a simple percentage fee. This must be particularly the case where firms use in their advertising, literature or discussions the term no win no fee. To do otherwise is to mislead the client.
We would make similar observations about ‘golden handcuff’ settlement clauses: they are potentially draconian and our research would suggest usually unnecessary. There are other approaches to managing conflicts with clients which are less draconian and fairer to all concerned. Solicitors in particular need to be much more protective of their duty to their client in such circumstances.
Regulators should review the permissibility of such clauses. They could be forbidden or standardised in ways that properly balance the interests of clients and lawyers.
We end by emphasising the title of this report. Employment tribunal claimants are not uncommonly portrayed as amoral actors, able to get something for nothing. There are two main senses in which this study suggests that view is wrong. Claimants clearly perceived themselves as being motivated by injustice not by opportunism. Whilst we were impressed with the consistency and
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Moorhead and Cumming (2008) Damage-Based Contingency Fees in Employment Cases: A Survey of Practitioners (Cardiff University Law School Working Paper, Cardiff).
sincerity of these views, we would also expect claimants to voice them; it is more important to emphasise the general absence of evidence that advertising influences claiming behaviour and the apparently total absence of ‘ambulance chasing’ by employment advisers. A stronger role for advertising, in particular, would have hinted at more claimants simply claiming because they could ‘have a go’ but we saw no signs of such an impact, quite the reverse. That is not to say that claimants are all, or even generally, in the right; but their motivations were, in our view predominantly based on a sincere sense of injustice rather than a cynical exploitation of opportunities to get money. For them, their grievance is not a ‘nothing’; it is a heart-felt wrong.
Secondly, it is a specific criticism of certain fee arrangements, damage-based contingency fees in particular but applicable to trade union funding and legal expenses also, that clients can bring cases without cost or risk. This research suggests that often such agreements are riskless and costless, but often they are not. Interestingly, clients perceive such funding arrangements as not having costs attached to them even when they win, and this may in part explain comments which suggested they were simply grateful for any help they could get. Poor service or charging practices were discounted by claimants on this basis. Paradoxically they excuse their lawyers because they think they are getting something for nothing. In fact, they are not.