Employment: Consultation on regulation of contingency fees in tribunal cases

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The Government has announced plans to consult on the regulation of “damages-based contingency fees” (“DBCFs”) in employment tribunals.  A DBCF is a type of “no-win, no-fee” agreement which allows a claimant’s legal representative to receive a percentage of the total damages award if the claimant’s case is successful.  As employment tribunals have very limited powers to award legal costs and rarely do so, DBCFs have become a popular alternative means of funding for those with limited finances.  However the Government is concerned that without regulation vulnerable individuals may be subject to agreements with excessive percentages or their compensation going to advisers or unreasonable lock-in terms.

Proposed regulations

The proposed regulations would require:

• a cap on the percentage of damages that legal representatives can receive;
• legal representatives to give claimants clear and transparent information on total costs;
• legal representatives to provide explicit information on alternative means of funding;
• legal representatives to clarify the deductions made from the claimant’s award which are to go to the representative as their fee for taking on the case.

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