How Expensive is Employment Law Litigation?

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When someone retains us to pursue an employment law claim on their behalf, they inevitably ask two questions:

  1. How long will it take, and
  2. How much will it cost.

The reality is that both of these things are linked, and they are impossible to predict.

While that may not be very satisfying to hear, we cannot control how long a matter will take when it depends on another party. For example, a matter could be resolved quickly and at relatively minimal cost, or the same matter might involve weeks or months of negotiation followed by months or years of litigation, with far more extensive costs. Or, more likely, it will be somewhere in between those two extremes.

How long a case will take and how much it will cost will depend on the actions of our client and the ‘other side’.

Legal Costs Awards

We always caution our clients that in addition to our fees, they could be on the hook for a portion of the other side’s legal fees if their claim is unsuccessful. The general rule is that the losing party must reimburse the winning party for some of their legal costs; it is usually between 50% and 75% of the actual costs. On the bright side, this also means that if our client is successful at trial, they will be entitled to recover some of their legal fees.

Note that this is the general rule if the matter goes to trial. Since most cases settle outside of trial, the issue of legal fees is often one item considered during the negotiations; you cannot “force” the other side to pay your legal fees in a settlement, since settlement is voluntary.

Recent case – plaintiff ordered to pay $143,978.67 to their former employer for legal costs

The recent case of  Goruk v. Greater Barrie Chamber of Commerce is a good example of the risk of litigation. In that case, the plaintiff sued for wrongful dismissal and the defendant asserted that it had just cause to dismiss her. Although the Judge described it as a “close call”, the past employee lost. As a result, the Court had to assess costs.

The employer had asked for $160,000 in “partial indemnity costs”, which means a portion of their actual costs, and the Judge found that was not unreasonable for a case that involved 13 days of trial in which the past employee was seeking roughly a million dollars.

The Judge agreed with the past employee that her case was reasonable, though it was ultimately unsuccessful, and acknowledged that “the reasonableness of the plaintiff’s position in this case is a relevant factor” in assessing costs.

The Judge also acknowledged a public policy concern:

[51] This was a wrongful dismissal action. There is almost always a power imbalance in employment cases in favour of the employer. That was the case here, even though Ms. Goruk was represented by skilled and experienced counsel. The inherent power imbalance in these types of cases raises a heightened concern about access to justice. Future dismissed employees may look to cases like this one and be scared away from advancing legitimate claims due to the risk of facing a crushing costs award in the event of a loss.

However, he went on to acknowledge the economic realities of litigation:

[52] Having said that, it remains a difficult reality that litigation is an expensive business. It is not for the risk-averse or the faint of heart. There are winners and there are losers. And it is a well-established convention in our civil justice system that losers pay the winners a significant portion of their costs. Ms. Goruk knew that going into this case. She would have had a good sense, I am sure, of what costs were at stake.

[53] The defendant was successful and is entitled to an award of costs. The defendant ought not to have to pay the price for any under-estimation of risk on the part of the plaintiff. At the same time, I am prepared to take into consideration the negative impact that crushing costs awards may have on access to justice. The balance is not an easy one. There is no getting around the fact that the defendant is entitled to a significant costs award in its favour. Factoring in the reasonableness of the plaintiff’s claim results, in my view, in a modest reduction in the amount to be awarded in all the circumstances of this case.

Just Cause: you either win or lose – there is no middle ground

This brings up an important point that we always stress with our clients: when it comes to just cause for dismissal, it is all or nothing; there is no middle ground. In other words, either the employer did not have just cause, in which case the employee will be entitled to their full severance entitlement, or the employer did, and the employee will not get anything. In the Goruk case, that means that even though it was a “close case”, the plaintiff lost and had to pay $143,978.67 to the defendant, in addition to her own legal costs.

Cost-Benefit analysis is crucial

We always tell our clients that when they consider pursuing or defending a dispute, they should always do a cost-benefit analysis. Every gain comes at a cost, and while there are never guarantees, it does not usually make sense to proceed if the anticipated costs outweigh the anticipated benefits. Of course, sometimes the benefits are not just monetary; some of our corporate clients will take a position for the precedential value. Whatever the factors, a realistic approach should be taken to determine whether it is worth pursuing.

Sometimes, a client will decide to pursue a negotiated settlement but recognize that they will not proceed to litigation. That way, they can control their costs.

Flat Fee Billing: An Alternative to Traditional Legal Fees

Our firm provides alternatives to the traditional billing method, which is based strictly on time spent; to be honest, we like to avoid the billable hour when that is possible. The most common way to do this is a block fee approach, which involves fixed fees for each stage of the matter.

For example, we usually start with the negotiation or pre-litigation phase. Rather than billing for every minute we spend drafting a demand letter, getting instructions, and negotiating with the other side, we agree on a set fee with you upfront. If the matter does not settle during that phase, we would negotiate a fee for the next phase. Or, as mentioned above, we may decide that there will be no next phase.

Bottom Line

The bottom line is always the key. Taking into account:

  • money,
  • time,
  • stress,
  • anxiety, and
  • anything else that is relevant,

we always encourage our clients to objectively assess whether it makes sense to:

  • commence a dispute,
  • defend it,
  • continue it,
  • litigate it or
  • settle it.

Whether you are an employee or an employer, we will advise you and put your claim forward as strongly and strategically as we can. So contact us if you are considering a claim.

Other Blogs

Stuart and others on the team at Rudner Law are frequent contributors to the following sites: 

First Reference Employment Law Resources
Canadian HR Reporter Blog
Rudner Employment Lawyer In The Lawyer's Daily
Legal Matters Employment Law Canada

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