This question (or its mirror image equivalent does the employee have to pay the costs of a Settlement Agreement) is the most frequent question we get asked at the initial consultation when we give settlement agreement advice here at settlement agreement services towers.

The very simple answer is “No” but like most simple answers the actual picture is more complex and the answer turns out to be the opposite. To understand the answer you need a bit of general historical context. The 1993 legislation which introduced settlement agreements (at that time called Compromise Agreements) didn’t say anything about who pays the costs. It simply left it to the individual parties to work out. Very quickly though a pattern emerged. This was a new fangled thing in 1993 and employees were generally suspicious of what they were being asked to sign and why. I think this pretty understandable, if you were asked to sign a document which took away rights even if you didn’t entirely understand what it was about you would be pretty wary. When this involved getting legal advice from a Solicitor when there is a general perception that talking to a Solicitor is expensive this made the situation even worse. Many employees started from a position that they would try to avoid getting legal advice.

Savvy employers appreciated that if they offered to pay the legal fees which were not that great and often a small sum compared with the severance payment to the employee, typically about £300-500 plus VAT, the employee was much more likely to go and get the legal advice which was a requirement of the legislation.

Even today we still have employees who insist they don’t need legal advice on their settlement agreement and simply don’t understand that it is not valid without it. Legal costs certainly can be scary in certain situations but they are really not an issue with Settlement Agreements.

It quickly became conventional for employers to either pay the legal costs in full or make a substantial contribution towards the employee’s costs. In practical terms this made sense. It was the employer who was gaining the protection from a claim being made against it and it made sense for them to pay the costs of gaining this protection together with any sum they were paying to the employee.

It doesn’t make any difference whether or not the potential claims of the employee have any prospect of succeeding. The real issues here  are the costs to the employer of dealing with a claim – both  the legal costs and the cost of the management time expended. In addition there is the actual physical time which gets spent dealing with a claim and what we call the stress and hassle factor.

Anyone who has been involved in claims, as we are constantly as it is part of our business, will know exactly what we are talking about. It is one of those things you can explain endlessly but it only really makes sense once you have been through a heavy case. I suspect it is a bit like being a man who is empathetic to their wife giving birth. You just cannot know what it is like unless you have experienced it – so my wife tells me.

So in conclusion the simple answer to the question posed in the title is No and the real world answer is Yes. To give that answer some context in 30 years and thousands of Settlement Agreements we have only known 2 occasions on which the employer did not pay any legal costs at all. For employees in this context legal costs are not something to be afraid of.