Some employment solicitors may be ‘exploiting client ignorance’ of their funding options for their own gain, research has claimed.

However, it was found that generally claimants were happy with the services provided and with the fairness of their fee arrangements.

The exploratory study, carried out by professor Richard Moorhead and Rebecca Cumming of Cardiff Law School and published by the Department for Business, Innovation and Skills, is the first to seek employment claimants’ perspectives on legal funding. It found that many employment lawyers are failing in their professional obligation to advise on the three main alternatives to paying privately – contingency fees, trade union funding and before-the-event (BTE) legal expenses insurance. There is a ‘real risk’ that this failure ‘is being driven, in part, by solicitors’ self-interest in charging clients on their preferred basis’, it said.

The research also raised concerns over the lack of transparency in charging – especially for disbursements and VAT – as well as the influence of different funding arrangements on advice over settlement offers. Privately paid practitioners were more likely to present advice in a neutral manner, while ‘advisers using other arrangements were more likely to speak in terms apparently designed to ensure the client accepted their advice without argument’.

Moorhead said: ‘The result suggests that some firms engage more fairly with their clients than others. Professional rules have not kept up with developments in the market and need to be revisited.’

Many employment lawyers do not offer contingency fees, but it is not known how many still advise of the option.

Richard Fox, head of employment at City firm Kingsley Napley and chairman of the Employment Lawyers Association’s legislative and policy committee, said: ‘I don’t have experience of people not telling clients of the alternatives. These days, many clients I see are well informed. They are aware of the alternatives in vague terms and ask questions.’ However, Fox – who has worked under a contingency fee – acknowledged that lawyers would benefit from knowing more about them.On settlements, he added: ‘I’m not satisfied that the perceived conflict leads clients to be mal-advised.’

The government recently announced a crackdown on the use of contingency fees in employment cases (see [2009] Gazette, 21 May, 1), but Moorhead said the research suggested there may also be ‘significant problems’ with BTE and trade union funding which ‘should not be brushed aside’.