Your Legal Fees in Employment Matters: Here’s How to Get Your Employer to Pay Them

“Doctors purge the body, preachers the conscience, lawyers the purse.”

German Proverb

ACTUAL CASE HISTORY: Madeline, 43, was the Director of Design for a Los Angeles-based manufacturer of high-priced handbags. She was well-known and highly regarded in her industry. Her duties included supervising independent designers in New York, visiting factories in China, and attending fashion shows in Europe, and so entailed frequent, significant travel. Her travel expenses were quite large, frequently thousands of dollars each month. Each month she would submit receipts and expense reports, and each month she would be promptly reimbursed.

In early 2006 a newly-hired Finance Director initiated new expense reimbursement policies. To Madeline, some seemed impractical, while others seemed unfair, including new rules that required expense reports be filed no later than Friday (Madeline was often still away), use of hotels charging no more than $100 per night (New York hotels cost at least $200 nightly), and coach class airfare (making LA to Paris travel physically taxing). Over six months, Madeline was precluded from being reimbursed $28,000 of funds she had charged to her own credit cards. She appealed to Human Resources for help, but was essentially ignored. She actually considered leaving the company.

Not knowing what else to do, Madeline asked us to write a cordial letter to the company’s General Counsel explaining that these expenses were necessary, the new restrictions were making it difficult to do her job, and that the problem was very upsetting. His response was prompt, and wise: knowing Madeline’s importance to the company, he offered a reasonable solution: Madeline would be reimbursed for all “reasonable, business-related” expenses, provided she (or her administrative assistant) submitted, along with the receipt in question, an explanation of why it was necessary.

Legal Fees

Madeline called the General Counsel to thank him, and politely asked him one more thing: would the company be willing to reimburse her for our firm’s legal fee, which amounted to several hundred dollars. Surprisingly, yet wisely, he approved it, finding it in his own words “both reasonable and business related.” That small gesture went a long way in calming Madeline’s nerves, easing her work, and enhancing her loyalty.

LESSON TO LEARN: Every now and then an opportunity or problem at work entails legal expense. You may be sued by a former colleague or customer, you might be asked to testify at a trial, you may need to negotiate a contract. You might even need to initiate a lawsuit against your employer. As it is with paying taxes, no one likes to pay legal fees. In some circumstances your employer may be required (by law or policy) to reimburse you. In some circumstances, your employer may be convinced to reimburse you. It’s important to bear in mind that employer payment or reimbursement of your legal expenses is a possibility; it’s important you don’t presume it’s not possible. While employer payment of employee legal expense is surely not “the rule,” it happens more frequently than you might think.

WHAT YOU CAN DO: When it seems necessary or appropriate to have legal counsel on your side, or at your side, in the workplace, consider the following:

1. Indemnity from Corporate By-laws: If you are personally sued for something you did while on the job, within the scope of your usual job duties, there’s a good chance you have a legal right to have your employer pay your legal fees. Most corporate by-laws provide for “indemnity” (which means “protection from loss”) of higher level employees, officers and directors for job-related acts. If these are your circumstances, inquire with your employer’s Human Resources or General Counsel departments to determine if you are covered by the company’s by-laws.

2. In a Contract: Senior executives, including almost all CEO’s, have written employment contracts. Most provide that the company will reimburse the executive for legal expense incurred in the negotiation of the contract. Often a “cap” is imposed; sometimes a certain amount is provided (such as $10,000), and sometimes the “cap” is described only as “in an amount considered reasonable by the company.” Union members, too, often have a provision in their union contracts that grant them free (or subsidized) legal representation in certain circumstances.

3. According to Company Policy: Many companies have policies – written or unwritten – that grant employees legal representation, or reimbursement for legal expense, in certain events. As examples, (a) if you are called to testify under oath at a government hearing by a regulator, or (b) if you are directed to appear before a Grand Jury that is investigating an embezzlement of funds from the school district you work for. Additionally, if your boss or his/her boss is provided legal counsel in these events, you have a very good argument that you should, too. Where by-laws are not helpful, and no contract exists, don’t be afraid to ask your employer’s Human Resources, or General Counsel, if company policies or practices grant you legal representation or reimbursement of legal costs in your situation. And don’t be shy about arguing for it, because it may be in their best interests, as well as yours. You might also ask to see your company’s internal policy handbook, if one exists.

4. “He Who Requests the Tune Must Pay the Fiddler”: If you are asked by your employer to sign anything “legal” related to work – such as a sworn affidavit, a non-compete agreement, a severance agreement, or any kind of contract – you might just take the sensible position that “You have asked me to sign this; you should therefore pay my expense to have an independent attorney tell me its meaning, its implications, and its potential risks.” Said differently, “I’m not signing anything until a lawyer tells me what it means, and a lawyer who is looking out only for me.” If you are denied such payment, and do not see an attorney as a result, you might later take the position that you did not truly understand what you signed.

5. As An Expense Reimbursement: Likewise, in several situations our clients have taken the common-sense position that legal expense was, for them, a “necessary and appropriate business expense” that is their right, according to a contract, an offer letter, the employer’s policies, or even an employee handbook (as in our case history, above.)

6. By Law or Court Order: If you sue your employer based upon any one or more of the local, state and federal laws that protect employees from workplace harassment, workplace discrimination, civil rights violations, non-payment of wages, or workplace retaliation, chances are that if you win your case, you will be permitted to collect your legal fees, as well. This is because the law, itself, says so in many of these situations. In New York, for example, if you are intentionally denied wages or salary payments, or if you qualify as a protected “whistle-blower,” and are the successful party in your lawsuit, chances are you will be paid, too, your legal expenses. In many other cases, as well, courts may direct employers to pay the legal expense of employees who have sued them. Each law and case are unique; qualified local attorneys can advise you best.

7. Always a Potential Negotiation Point: Every time you are engaged in any kind of negotiation with your employer, consider requesting – above everything else – reimbursement of legal fees, or at the very least, a contribution toward them. Think about it: if the employer really wants to “close your deal,” a reasonable reimbursement or contribution to your legal expense may be available. And by the way, if your employer says, “We never do that,” your ready reply should be “Then call it something else, but I think this is a matter of fairness, and I know the company is always fair.” It’s a persuasive response, one that has worked for many of our clients. As in every negotiation, if you have what they want, they will usually give you what you want. It’s that simple.

With increasing frequency, employees encounter personal situations at work that call for legal analysis, counsel or representation. It’s always a good idea to have a competent, independent attorney “at your elbow” at times like these. The problem, though, is the expense, because competent legal services are not inexpensive. That being said, the solution to the problem – your employer footing the bill – may be available to you, by right, by law, by policy, or by request. As with everything else, you don’t get unless you first ask, and in being successful . . . it’s up to you.

SkloverWorkingWisdom™ emphasizes smart negotiating – and navigating – for yourself at work. Negotiation takes knowledge, and sometimes it takes specialized, legal knowledge, which can be expensive. That’s a concern, but a concern that might be addressed for you by your employer, if you look for it in the right places, or ask for it using the right rationale. Knowing your legal rights and having the advantage of a legal perspective can only help you in your negotiating and navigating, especially in the identification, assessment and minimization of risk; that is essentially what lawyers do for clients. Gaining maximum rewards while taking minimal risks is what business is all about. But it takes more than luck to make that happen. It takes forethought, care and prudence, the essential ingredients in good negotiating. And it takes the strength, stamina and perseverance to pursue it properly, as well.

Always be proactive. Always be creative. Always be persistent. And always do what you can to achieve for yourself, your family, and your career. Take all available steps to increase and secure employment “rewards” and eliminate or reduce employment “risks.” That’s what SkloverWorkingWisdom™ is all about.

A note about our Actual Case Histories: In order to preserve client confidences, and protect client identities, we alter certain facts, including the name, age, gender, position, date, geographical location, and industry of our clients. The essential facts, the point illustrated and the lesson to be learned, remain actual.

P.S.: If you would like to obtain a list of five or more experienced, “employee-side” employment attorneys in your city, just [click here]. Delivered by Email – Instantly!

© 2008 Alan L. Sklover. All rights reserved. Commercial use prohibited.