GUEST COMMENT: Suddenly, RBS will only pay legal fees for its redundant staff if they use the lawyers it recommends

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Philip Landau

If you are being made redundant from a bank, you are likely to have received along with your exit pack a compromise agreement.

The compromise agreement sets out the full terms being offered to you, and stops you making any claim once it is signed. You have the right to take complete independent advice and the agreement only become binding once your solicitor has certified in the document that such advice has been given. This is all governed by statute.

What is not governed by statute is the requirement for your employer to contribute towards your legal fees, but in almost all cases an employer will do so (on average up to £500 plus VAT).

If you work for RBS, however they have adopted a slightly different twist on the conditions attached to their legal fee contribution. I have received numerous enquiries from concerned employees who say they have been informed that RBS will only contribute the £500 fees if you take advice from one of the “panel firms” listed in their guidance notes. The argument is that these firms are familiar with RBS processes and the format of their compromise agreements. RBS have pointed out that their staff have the right to go to any non-panel firm, but if they do, then they will not contribute towards the costs.

Most RBS staff who have contacted me are uneasy about this. If RBS are prepared to contribute up to £500 plus VAT for legal advice, what difference does it make who those fees are paid to? If a departing employee were to exceed this sum with his own choice of solicitor, RBS wouldn’t be picking up the bill.

From RBS’s perspective, it’s easy to see why this could be a good thing. The bank should save itself a long list of enquiries from solicitors unfamiliar with its processes.

I have not come across a similar approach from other banks. Most will allow staff they’ve made redundant to choose their lawyer freely and will pay a contribution for the advice.

When you do sign your compromise agreement from any bank, don’t forget the following:-

•   Make sure that the first £30k of any compensation payment is expressed to be free of tax and NI deductions (this includes a redundancy payment that is being made). In some circumstances, your notice period can be included in the £30k tax free sum but only if there is no PILON (pay in lieu of notice) clause in your contract of employment.

•  You may want a “non-derogatory clause”, so that your employer cannot bad-mouth you to any third parties.

•   An agreed job reference should be attached to the compromise agreement wherever possible, together with a clause that no oral references will be given in any less favourable manner.

•   Make sure that no post- termination restrictive covenants are introduced into the compromise agreement for the first time.

•   Are you owed an outstanding bonus? Make sure that the agreement properly reflects what bonus is due to you including in relation to deferred stock after you leave employment and this will need to be covered. Make sure any stock options and share awards are also covered.

•   You may have another job to go to at the time your compromise agreement is signed, yet you could be asked to warrant that you have not been offered a new job. You need to consider this carefully with your lawyer to ensure you are not in breach. There may be an opportunity to amend this clause.

•    Remember that once you sign the compromise agreement, there is no going back. You need to ensure that the reason for your departure is genuine and that that the compensation adequately reflects this. In genuine redundancy situations, there is often a redundancy policy or custom and practice that will govern what payments are made.

Philip Landau is an employment lawyer at Landau Zeffertt Weir Solicitors and offers eFinancialCareers users a free initial consultation. Click here to visit his site.