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‘No win, no fee’ agreements can improve access to justice in employment cases

04 December 2008

According to a new Cardiff University report, American-style no win no fee agreements can improve access to justice in certain employment cases for those who cannot otherwise afford legal representation. However, the report also highlights that such agreements may not always operate in the best interests of the public.

These are the conclusions of research published today by Professor Richard Moorhead and Rebecca Cumming, Cardiff Law School, in a report which is expected to generate significant interest from policy makers and legal practitioners.

The report looks at the use of controversial American-style contingency fees in employment cases, one of the few areas of law in England and Wales where such fees are permitted. Contingency deals allow lawyers to take their fees from damages won for their clients, meaning that payment is only received if the claimant is successful.

Professor Richard Moorhead said: "Employers generally outgun employees in employment disputes. We estimate they spend £3 for every £1 spent on claimants. American-style contingency fees redress some of this imbalance, but only for certain types of cases, most notably straightforward and higher value cases."

As legal aid does not cover employment tribunals, a no win no fee agreement is often the only option left open to the claimant. However, cases where compensation payments are relatively low and cases where the employer is more likely to put up a fight are less likely to be taken on.

The report also suggests that many of the criticisms made of contingency fee agreements are false. In particular, contingency fees are not responsible for a growth in weak or spurious employment claims. Cases brought under such fees appear to be as strong as those brought in other ways. Furthermore, there is no evidence to support the view that the lawyer fees charged under contingency fees are excessive or that practitioners ‘milk’ these cases for profit.

However, there is evidence that lawyer’s billing practices are not consistent and may lead to consumers being confused and charged more than they expect for ‘hidden extras’. In particular, lawyers take different approaches to charging VAT and other costs on top of their percentage fees. Some lawyers charge one clear rate inclusive of all charges but many charge other costs on top.

There is also a risk that consumers lose control of their cases under contingency fees. Lawyers tend to ‘handcuff’ clients to their settlement advice in a way which may damage consumer interests. If the client does not accept settlement advice, they have to represent themselves for the duration of the case and often have to pay the lawyer's costs, irrespective of the case’s result.

Professor Moorhead warned: "Whilst they do provide invaluable access to justice for some people who would otherwise be denied it, contingency fees have become established without consumer protection. One of the most important findings of this review is that the legal profession should be taking a lead on best practice; consumers expect no win no fee agreements to be simple but often they are not. The profession needs to be very careful when providing such services or disrepute for contingency fees will become deserved."

The report has already attracted considerable interest from the Civil Justice Council, the Ministry of Justice, the Trades Union Congress, the Law Society, the Employment Lawyers Association, and a number of senior judges responsible for legal costs issues and tribunals.


Notes to Editors:

1. The report is entitled Damage-based contingency fees in Employment Cases: A Survey of Practitioners

‘American-style’ contingency fees based on damages are often thought not to exist in England and Wales, but in fact have existed for many years in employment tribunals. Typically, a client is charged nothing if they lose but a percentage of their damages if they win. They are not permitted in court litigation. They should be contrasted with Conditional Fee Agreements (CFAs) which are permitted in court litigation; where the lawyer charges their normal hourly fee plus a success-fee based on a percentage of that hourly fee if they win and nothing if they lose.

Successive governments have rejected the introduction of damage-based contingency fees in the courts on the basis that they would lead to an Americanisation of the system, but they have not prevented their use in employment and other cases which do not involve courts.

This Study provides in-depth data on the use of damage-based contingency fees (DBCFs) amongst employment practitioners based on a telephone survey of 191 employment specialists working in solicitors firms and claims consultancies. It also reviews existing literature and conducts original analysis of the Survey of Tribunal Applications (SETA) data 2003.

2. Richard Moorhead's main research interests are legal aid, no win no fee arrangements, the courts, the legal profession, regulation of professions and legal systems and socio-legal research methods. He has conducted a number of evaluations of legal service programmes as well as theoretically informed empirical research into the courts and the legal profession. He teaches an undergraduate course on lawyers: practice and ethics and an LLM course on commercial legal practice.

3. Cardiff Law School is at the forefront of vocational legal education in Britain, it being one of only seven approved institutions in Britain to offer both solicitor training, through the Legal Practice Course, and barrister training, through the Bar Vocational Course. The School pioneered integrated law and language degree schemes in the 1980s.The facilities of the School’s library have been assessed as "outstanding" by the Higher Education Funding Council for Wales. The library has over 75,000 volumes, over 300 journals and law reports and a stock expenditure in excess of £200,000 per annum (well over twice the median for UK Law Schools). This represents one of the largest collections of law books outside Oxford, Cambridge and London. The School is also the founder and editor of The Journal of Law and Society, which is recognised as the most prestigious English language journal dealing with the operation of law in society.

Further Information:

Further information can be obtained from Richard Moorhead on 0292087 5098 (W) or 07963612005 (M)