Employers are not legally required to pay an employee's legal fees in relation to a settlement agreement. However, it is common practice for employers to offer a contribution towards the cost of obtaining independent legal advice.
This is because a settlement agreement will generally only be legally binding if the employee receives advice from an independent legal adviser before signing it. To help ensure that the agreement can be completed, many employers include a contribution towards legal fees as part of the proposed settlement.
How much do employers usually contribute?
The amount an employer offers will vary depending on the circumstances of the case and the complexity of the agreement. In many cases, employers provide a fixed contribution intended to cover the cost of reviewing the agreement and advising the employee on its terms and effect.
For straightforward settlement agreements, the contribution offered is often sufficient to cover the legal advice required. Where the matter is more complex, or where additional work is needed, the cost of legal advice may exceed the employer's contribution.
Why is independent legal advice required?
Independent legal advice is a legal requirement for most settlement agreements. The purpose of that advice is to ensure that the employee understands the terms of the agreement and the rights they are giving up by signing it.
A legal adviser will explain the effect of the settlement agreement, review the compensation being offered, identify any significant clauses that may affect the employee in the future, and advise on the practical consequences of entering into the agreement. This advice helps ensure that the employee can make an informed decision before accepting a legally binding settlement.
