By way of reminder, the charging of a contingency fee – where the amount charged by the representative is a percentage of the compensation recovered – had gained great popularity in the last few years. Costs are not normally payable by the losing party in the Employment Tribunal, so the DBA model provides one of the few funding options for the impecunious client. There are problems however, and for my discussion of the conflicting pressures on a DBA funded representative, and the background to the government’s decision to regulate them, see my previous post here.

The Damages-Based Agreements Regulations 2010 came into force in April. They provide for the formal requirements of DBAs, the information that must be provided and, importantly, a 35% cap on the percentage charged, including VAT.

As a former solicitor I still receive email notices of new Law Society practice notes – they are usually prosaic in the extreme, and I delete them, but this bulletin contains the following (controversial?) advice:

Tribunal proceedings are non-contentious business under the Solicitors Act 1974 (“the Solicitors Act”) and, so far as solicitors are concerned, a non-contentious business agreement compliant with Section 57(1) of the Solicitors Act could be used for Employment Tribunal matters.

A conditional fee agreement (as opposed to a DBA) would be enforceable and would not be caught by the Regulations. Such an arrangement might enable you to achieve a greater success fee than would be possible under the Regulations, and still avoid your client risking liability to you if the claim fails.

I don’t know if any solicitors have tried this. But the attitude of solicitor-practitioners shines through, and indeed the Law Society have called on the government to repeal the regulations, contending that the 35% cap will withdraw the possibility of representation from some needy claimants.

Read all, here.

Requirements of the agreement

• The agreement must be in writing;
• The claim or proceedings must be identified;
• The maximum percentage of damages which can be specified as fees is 35% including VAT;
• The circumstances must be set out by which any amounts become payable as fees must be identified – this will include provisions, for example, as to whether the percentage includes counsel’s fees, and the circumstances in which other fees become payable. This might include where the client refuses reasonable offers of settlement, or the representative is forced by the client’s conduct to terminate the retainer.
• The agreement must state the reasons for setting the percentage recovery at that level – this may be a moot point, as many representative firms will apply a blanket 35%. This does provide an area where representatives can compete with one another.

In addition, the following information must be given in writing (this will usually form part of the client care letter:

• Everything stated above;
• How the client might seek a review of the costs, fees and expenses incurred, and the circumstances in which they can do so;
• The services provided by ACAS;
• Whether other methods of funding are available, such as legal aid (unlikely), legal expenses insurance, pro bono representation or trade union representation. A solicitor would normally be under a duty to explore funding methods with the client in any case. I would say anecdotally that the legal expenses insurance policies that many of us have as part of our home insurance are underused, many people never think to enquire if their employment claim will be covered.
• The regulations state that where the agreement is terminated, the representative can charge costs and expenses, but that the agreement may not be terminated:
• by the client – if liability has been admitted, settlement has been agreed, or it is less than seven days before the tribunal hearing;
• by the representative – at all, unless the client has behaved or is behaving unreasonably.

The former seems sensible, as it prevents a client taking advantage of an admission of liability, good settlement offer, or the preparation work undertaken for a tribunal if he realises that he will pay less if charged on an hourly basis rather than as a percentage.

The latter seems to contain a glaring omission, which is that the representative must surely be able to terminate the agreement if it is under a professional duty to do so. There are a range of circumstances in which the solicitor is under a duty to stop acting which would not be attributable to unreasonable behaviour (such as a conflict of interest which had gone undiscovered), and the contractual position that would result is now unclear. Could frustration be argued?

These regulations do not enable contingency fees to be charged in “contentious” proceedings, such as personal injury claims or, interestingly, the Employment Appeal Tribunal. Barristers are, of course, still prevented by their professional rules from charging a contingency fee on any type of work. This may change in the future.

There are clearly advantages and disadvantages to using an organisation such as this. The benefit is that for a very small organisation HR compliance is achieved with virtually no allocation of staff by the employer, and as long as the business is smart enough to check its disciplinaries, grievances and dismissals with the helpline then they can rest assured any claims will be funded by the insurer. This is particularly attractive in a field like employment where largely meritless claims by employees against employers that have genuinely done nothing wrong can often proceed to a full tribunal hearing, and traditional hourly-billing by a solicitor can easily produce a five figure irrecoverable bill for costs.

But the disadvantage is that it reduces control by the employer. Some small employers simply want to be able to sack whoever they want and then pay a solicitor to perform some damage limitation afterwards. I have heard some employers, probably unfairly, claim that as the helpline is the gateway to the insurance policy, they ‘won’t let you sack anyone’. And, like any business agreement, the costs can sometimes be high and subject to automatic renewal and tie-in periods.

In this case, Peninsula had two claims brought against it, both of which were dealt with by the same Employment Judge. He was part-time, spending the rest of his time as a partner in a firm of solicitors who had recently posted an advertisement containing the following text:

Employers: Do you want to…

Deal with a local firm whom you can see and talk to at any time and avoid having the potential risk of dealing with untrained and unqualified ‘consultants’ or inexperienced and unqualified call centre ‘operatives’? Avoid expensive and lengthy tie ins of 3 or 5 years and pay only for the professional services that you actually utilise, avoiding subsidising others because you have to pay a large lump sum each year for services you may never use?

In finding against Peninsula in both their claims, the EJ professed rather unjudicial astonishment and castigation of Peninsula’s apparent failure to comply with employment law:

We remind ourselves that Peninsula holds itself as the biggest employment law consultancy in the country. For such an organisation to flagrantly breach employment legislation is, frankly, astonishing. … Put simply, Peninsula did not practice what they preach. …However, the claimants did have a legitimate expectation that Peninsula would comply with those standards of behaviour. This is all the more so where Peninsula hold themselves out as being an “Employer of Excellence”, (Peninsula having awarded themselves that accolade).

Of course, the appeal against the finding on the basis of apparent bias succeeded. We should remind ourselves of the basic test – “whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased” – Magill v. Weeks [2001] UKHL 67. In addition:

If there were real ground for doubting the ability of the judge to ignore extraneous considerations, prejudices and predelictions and bring an objective judgment to bear on the issues before him, a real danger of bias may be thought to arise. … If in any case there is real ground for doubt, that doubt should be resolved in favour of recusal. (Locabail (UK) Ltd v Bayfield Properties Ltd & Anor [1999] EWCA Civ 3004).

If we put ourselves in the position of the fair-minded and informed observer, we can see that there is a real possibility that the EJ’s business prejudice against Peninsula and their ilk has infected his objectivity towards them.

It should also be noted that in the second of the cases under appeal the EAT found no prejudice due to the length of time that had elapsed, and given that the EJ was, by then, full time. Also, where a lay member in the latter case had (rightly) recused himself there was no inherent objection to the case continuing with the EJ alone and the other lay member, even though the case was part-heard and they had had the benefit of his observations.

Full judgment: Peninsula Business Services Ltd v Rees & Ors [2009] UKEAT 0333_08_2307 (23 July 2009)

Legal Week outline some of the new features but there’s nothing on the SRA webpages at the moment. More news as it comes in.

Online legal services provision, as well as DIY, is on the increase, and it will be interesting to see how much independent bloggers / practitioners make their mark in the new world order. Unfortunately there’ll be nothing similar coming from me in the near future – my second six and its attendant daily nationwide travel starts very soon indeed.

Current regulations forbid any practicing solicitors from providing legal services to the public through any medium other than an actual law firm regulated by the SRA. One rule for any such firm is that it is 100% solicitor owned; so all partners or shareholders must be solicitors themselves. This is of course no good for an organisation like RBS Mentor, owned by a bank, or First Assist and Qdos, privately-owned insurance services and consultancy providers. So these businesses set themselves up as litigators, but simply do not describe any of their litigators as solicitors or barristers, simply “representatives” or “consultants”. As there are no rules on rights of audience in the tribunals, these people may then do casework and appear in the tribunal to their heart’s content. They sometimes still farm the work out to solicitors, and sometimes book counsel to appear at hearings, simply as their work waxes and wanes. A solicitor employee will simply shelve his or her practicing certificate and then not hold out as a solicitor. There is still a question mark over the professional acceptability of this, although it is commonplace.

Of course this causes problems with the rest of the law and legal system, which is used to giving considerable favour to qualified lawyers that appear before it. A few weeks ago we found out that advice from these non-qualified representatives does not attract privilege (at least before litigation is contemplated). Now we find out that they are not allowed costs orders. The decision springs from the principle that appeared in Agassi v HM Inspector of Taxes [2005] EWCA Civ 1507, which considered the exact same position but with tax specialists rather than employment. Andre Agassi’s tax consultants had done an admirable job of conducting the case on his behalf, but they weren’t a law firm so no costs award for them.

This is a fairly severe impediment to insurers (the most common users of these companies) and those that are paying privately, as although costs orders in the tribunal are comparatively rare, they provide protection to those companies who are forced to litigate a misconceived or mischievous claim. Now a Claimant at risk of a costs order can proceed in the knowledge that if he is against a non-law firm his exposure will be greatly limited.

It should be noted however that the Respondent in this case was allowed its costs of counsel who appeared at the hearing, since he was a qualified lawyer.

Clearly change is needed, as these companies are accepted as a valid part of legal services provision. It is likely reform will come with Alternative Business Structures, due in the next few years.

In a nutshell, unless your legal advice is coming from a qualified and practising barrister or solicitor, it is not subject to legal advice privilege. It can be subject to litigation privilege. The difference is that litigation privilege only attaches to advice given in contemplation of litigation. In this case, advice on how to respond to a grievance was held not to be contemplation of litigation. Hinckley & Bosworth were lucky here – their employment consultant happened to be a solicitor and still had a practising certificate. He could easily not have done, and it would seem the advice would have been discloseable.

Hickley & Bosworth’s rather nice motto ‘Post Proelia Concordia’ – After the battle, harmony – must reflect the resultant atmosphere in their legal department.

Any ideas some might have that this is an insuperable block to new-style providers are probably ill-founded – given that the model of regulation will be along the lines of a qualified lawyer having supervision of legal services, I imagine this will likely be treated as the same as a firm of solicitors.

“Subject to and conditional upon the terms set out below, [Freeport] will pay to you the sum of £445,680 gross as compensation in respect of the termination of your employment…

“You warrant as a strict condition of this agreement that as at the date hereof… there are no circumstances of which you are aware or of which you ought reasonably to be aware which would constitute a repudiatory breach on your part of your contract of employment which would entitle or have entitled the company to terminate your employment without notice”.

… in other words that subject to the warranty being true, we’ll pay you lots of money. The warranty was not true. Collidge had done bags of things which would have entitled Freeport to summarily dismiss him.

The judgment confirms that in this agreement, the warranty was a condition precedent. In other words, all performance by Freeport of its obligations under the agreement was subject to the warranty – rather than it simply having a remedy of damages for its breach. Compromise agreements are tricky – they have to be very tightly drafted according to the individual circumstances, but increasingly are simply run off as precedents. Given that the context in which the agreement was signed, Collidge may well have thought that he was protected from subsequent discoveries of impropriety, so this case emphasises both the quality draftmanship required on compromise agreements as well as the thoroughness with which the employee’s solicitors must advise.

‘Your solicitor, qualified to answer’ is a major national advertising and PR campaign to promote solicitors to the public.

Our aim is to encourage consumers to use solicitors by promoting their services and highlighting the unique selling points solicitors have to offer. Running from April to June, the campaign will focus on the reasons why solicitors are the only sensible choice for consumers. They are:

• more expert and reliable than other providers of legal or quasi-legal services
• properly regulated
• excellent value for money 

 … or so say the Law Society in their recent marketing campaign to raise the ‘brand’ of solicitors. I’d edit the list as follows:

• more expert and reliable than [many] other providers of legal or quasi-legal services [but are increasingly inferior to some]
• properly regulated [and insured for when they fail to be more expert and reliable than the other side]
• excellent value for money.

I don’t want to be confrontational; there are solicitors firms out there that do all the Law Society says, but they are the minority. Use a solicitor ten times over rather than some internet cowboys, but the badge of ‘solicitor’ itself is no guarantee of quality. Solicitors should be the cornerstone of reliability and expertise, but firms must make some real changes. Taking the Law Society’s list:

• Expertise: I started off a solicitor in a high street firm which did a good amount of employment law for the firm’s size. I moved from there to a consultancy / insurance company you’ve never heard of, which in respect of its consultancy at least is completely unregulated. The quality at the latter was ten times better – the expertise and dedication to employment law was enormous. I’m not saying the law firm wasn’t competent – it was that and more – but it didn’t have the same excellence. I attribute the excellence at the consultancy to the commercial pressure of competition. If you’re Bloggs & Co Solicitors then you immediately have a badge stuck to your chest, and the public will reckon you the best man for the job because of it. If you’re Bloggs Limited and you want to succeed, you’d better make a name for yourself, get out there and network, and deliver on your commitments.
• Regulation: Boy do you need that. I wouldn’t for a second disagree. When you provide legal services you play with people’s lives, and they need a fundamental reassurance that there is a legal framework for them to seek redress when you cock it up. What’s wrong with the system is the regulator itself - the SRA. Its huge, monolithic, inefficient, and worst of all its one-size-fits-all style of regulation prevents firms from competing effectively. You also need compulsory insurance for professional negligence, and most other professionals would do a double take at the premiums solicitors have to pay.
• Excellent value for money: Where solicitors lack at the moment is in charging innovation, as the Law21 blog notes every couple of weeks or so, and as I’ve rambled about previously.

This is all terribly sad, as it commercialises the role of solicitor which in previous days wasn’t simply a job, but a vocation. But solicitors haven’t changed for the worst, they’ve simply been outpaced by modern society. They must adapt and they must survive. The Law Society campaign is completely backwards – it tries to educate people that solicitors are the answer to their problems when this message is becoming less and less true every day. Their time and resources would be much better spent in engaging with their own profession on how to rescue the brand of ‘solicitor’ and invest it with some meaning in the modern age.

And it’s not even as if there’s been nothing to report. Favourite case recently must be Kuzel v Roche Products Ltd which talks of the burden of proof in Unfair Dismissal cases. Generally in law the person advancing a case, eg you saying that your neighbour cut down your hedge, the state saying you murdered him in retaliation, has the burden of proving the allegation. Not so in unfair dismissal. S.98(1) ERA 1996 moves the burden on to the employer. So if I say “you sacked me for an absolutely bloody stupid reason” then my employer doesn’t have to disprove my version of events to oppose the claim, they have to come up with their own valid reason for my dismissal and prove that. The reasons I advanced don’t really come into it.

In this case however the employee had advanced whistleblowing (protected disclosure) as the reason for her dismissal. It’s obvious why she would make sure she did this if she thought she might have a shout – whistleblowing claims aren’t subject to the financial limits of normal unfair dismissal and include an award for injury to feelings. The employer ran some taking-the-piss SOSR defence about the relationship having broken down. The tribunal stuck two fingers up at everyone by finding that dismissal was for a third reason, against the pleadings of both parties. The consequence for the simple unfair dismissal claim is obvious – it succeeds as the potentially fair reason advanced by the employer was not found to be proved. The odd consequence is for the whistleblowing claim – where does the burden of proof lie? Traditionally it should be at the employee’s door, it’s her case and her allegations. The statute is largely silent on the issue, the reversal of the burden of proof only seeming to explicitly apply to the reason actually advanced by the employer to be the reason for the dismissal. Well for once we’ve some useful guidance, produced by the EAT and approved by the Court of Appeal:

1. Has the employee shown that there is a real issue as to whether the reason put forward by the respondent was not the true reason?
2. If so, has the employer proved his reason for dismissal? Failure to do so will render the dismissal unfair, and then coupled with a primia facie case from the employer will entitle the tribuanl to infer that the employee’s stated reasons are correct.
3. Has the employer disproved the reasons advanced by the employee? Even if the employer has failed to prove it’s own reason for the dismissal it may still have disproved that of the employee.
4. If not, dismissal is for the reasons stated by the employee. It is not however, at any stagae, for the employee to prove her reason.

I’ve mucked around with the above to apply generally.

The Court of Appeal seem to have taken the line that this case is one for minority interest, stating that it shows how worked up lawyers can get about something like the burden of proof. I agree, but not with their observation that this sort of case will be rare. Protected disclosures are often presented in conjunction with a general claim for unfair dismissal, and its similarity to a discrimination claim may well mean that the facts coincide with the parties having fallen out generally. The unfair dismissal might well then often succeed without the whistleblowing. The same can be said about maternity-related dismissals.