Australia: No win, no fee: The seven must-ask questions for employee litigants

Last Updated: 25 July 2018
Article by Brian Powles

With the growing proliferation of 'no win no fee' and contingency based employment litigation agents, it's easy to presume that this as a positive move for 'access to justice' for employees. But sadly, an undercurrent within this trend is having the opposite effect.

Never look a gift horse in the mouth – right? Sadly, it's not that simple. When the 'gift horse' makes promises that seem a little too good to be true, with the assurance that you can 'pay me later', I think it's a good idea to check its teeth before diving all of the way into its mouth.

Employees have one shot at challenging their dismissal, and this is generally an action that has to be taken within 21 days. When the arrangement involves signing your entire cause of action over to an unregistered agent, with no recourse against them, and no hope ever getting it back or having another go, there are a couple of key considerations that are worth exploring before signing on the dotted line.

  1. What are the costs if you do win?
  2. This is an important question. Contingency arrangements have traditionally only been sustainable in legal contexts where the prospects of at least some type of compensation can be assessed before accepting the engagement in the first place (personal injury and wills & estates being the classic examples). In employment litigation, there are no guarantees of anything. So the awkward question then becomes, how do these lawyers or agents afford their business overheads? How do they still have flashy cars and private school fees? Even an expert 'no win no fee' practitioner would have to budget for losing at least some of the time. The reality is that those clients that win pay more to make up for the clients that lose. Check the fee arrangements in some detail before you get too excited about the potential savings.

  1. What is your maximum compensation?
  2. It pays to do some research on what your likely compensation will be if you are successful, and in particular, what is a typical settlement amount prior to your case being litigated at a hearing. This information is readily available via google, and is important to establish before signing over your only cause of action. In the Unfair Dismissal jurisdiction, 26 weeks' wages is the maximum possible under the Fair Work Act 2009 (Cth). Typically, this amount is only ordered by the Fair Work Commission following a determined hearing, and only in the most serious of cases, involving aggravated 'unfairness' to a long serving employee. Typical settlement amounts reached prior to a hearing, during a conciliation conference can be anywhere from 2 to 10 weeks' pay depending on the income and circumstances. Many employers will arrive at the conciliation determined not to make any financial offer, but willing to consider other things such as re-characterising the dismissal as a resignation, or offering a statement of service. These things may have value in the circumstances, but being tied to a 'no win no fee' arrangement may take them off the table until such time as they are no longer worth the paper they are written on.

  1. How does this potential compensation compare to the fees being charged at the various stages of matters?
  2. Typically, the bare minimum costs of professional representation all the way to an unfair dismissal arbitration at the Fair Work Commission will be somewhere between $15,000 and $20,000. As a general rule, the legal costs of parties are almost never awarded against the other party in unfair dismissal, which means even if you win, you don't get your costs back. As a rule of thumb, therefore, employees earning less than $60,000, with less than five years' service, will rarely break even if they win.

    If you are quoted a fixed amount, such as $4,000 up to and including the conciliation, then compare this to an amount equal to 6 to 10 weeks' pay, because this is about as far as most employers will go in a conciliation. If this compensation amount is less than the fees you have been quoted, there is a good chance you will walk away with nothing, and you will have lost your chance at the cause of action, and signed away all the compensation you were given to a paid representative. In this situation, many of these lawyers and agents will suddenly seem a lot less interested in helping you achieve 'justice' than they originally were when they took you on.

  1. How much control will you have over settlement?
  2. If a settlement offer is made, you need to consider how much control will you retain. Has the 'no win no fee' practitioner committed to seeing your case through all the way if you are not happy with settlement options? Or can they force you to settle in a situation where they end up getting paid and you get nothing? Perhaps even worse, are they able to discontinue representation if things are heading south, but still charge you? Or if it all gets too stressful and you want to stop the claim, can you walk away, or will they still charge you? Read this fine print carefully. There are often hidden costs in this type of arrangement.

  1. What happens with settlement amounts?
  2. Who will the settlement amounts be paid to? Have you signed over your entitlement to receive the funds? This is an important consideration in situations where you achieve a result of sorts, but you wish to challenge your legal fees. If settlement funds are paid directly to your agent, you will lose practically any opportunity to challenge the fees that you are subsequently charged. This is especially the case in relation to non-lawyer paid agents, who are not governed by the Legal Professional Uniform Law 2015.

  1. Is the person you are using a registered legal practitioner?
  2. If everything else above checks out, this is extremely important. This is not because lawyers are necessarily better or more knowledgeable than non-lawyer agents (although in truth we are). The reason this is important is two-fold. Firstly, when you are represented by a lawyer, all of your discussions are subject to professional legal privilege. Secondly, solicitors and barristers are subject to a number of obligations under statute, common law, and equity. The most important of these, is that legal professionals have obligations to only act in the best interests of their client. If these obligations are breached, there are systems in place where you can complain, and that lawyer can be disciplined by its regulatory body. Within the profession, these obligations are taken very seriously, both by practitioners and regulators alike. Non-lawyer paid agents are not subject to the same obligations. Some of them are talented and ethical professionals, some of them are not. But you won't know until afterwards, and there is no regulatory body to assist you if it goes wrong.

  1. Consider representing yourself.
  2. The unfair dismissal jurisdiction is set up for self-represented litigants. The tribunal members are extremely patient and helpful with self-represented parties, and much less patient with paid agents. Permission is needed for legal representation at the Commission. If you are a self-represented, then often your employer may not get permission to be represented by a lawyer. Even if they do get permission, the Commissioner will make sure that the hearing is conducted as fairly and informally as possible. An agent may have some tricks up their sleeve to achieve a slightly better outcome for you, but it is often not likely to be commercially viable once his or her fees are paid. Very often, you may be better to go it alone.

There is no such thing as a free ride when it comes to employment litigation. With the pool of compensation already low, in a time of life where every penny counts, consider your options carefully before signing away your case on a 'no win no fee' promise.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Brian Powles
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