Who pays my legal costs in a settlement agreement?

Many people assume that engaging a lawyer or legal specialist is expensive. In the case of a settlement agreement (vaststellingsovereenkomst, or VSO), this is often not so bad in practice. If a settlement is reached, your employer will in most cases contribute to your legal costs. In 85% of cases, the employer reimburses the full legal costs. In almost all other cases, the employer pays at least a (substantial) part.

Why does your employer contribute?

That may seem odd: why would your employer pay for someone negotiating against them? The answer is simple. Your employer wants certainty.

An employer wants to prevent you from later claiming that you did not know what you were signing, or that you were put under pressure. Through such a claim of error (dwaling) or undue influence (misbruik van omstandigheden), a settlement agreement could in theory be challenged. If your employer advised you to engage a legal adviser, and even reimbursed those costs, such a claim will later have virtually no prospect of success. For your employer, the reimbursement therefore works as a form of insurance: the settlement stands.

Our starting point: all costs reimbursed

In every settlement, we seek to agree that your employer reimburses all legal costs you have incurred. This is not a side issue, but a standard part of the negotiation. In most cases, we succeed.

Is there no reimbursement in your settlement agreement?

That happens regularly, but it does not mean the matter cannot be discussed. A settlement agreement is a proposal, not a final offer. The reimbursement of legal costs is also open to negotiation, and we include this in the process.

Is a low amount included?

Even then, there is often room. You still regularly see settlement agreements offering a reimbursement of, for example, EUR 500 or EUR 750 including VAT. That is simply too low. Those are the amounts of fifteen years ago.

By way of comparison: our settlement check costs EUR 875 excluding VAT. It includes all the advice you need: whether the settlement agreement is correct, what the consequences are for your unemployment benefit and other social security rights, and what it means for your pension. That takes time. A proper settlement check easily takes around 4 hours of work, including communication with you. A reimbursement far below that is therefore not realistic, and you can put that to your employer as well.

What if your employer does not reimburse everything?

In a small proportion of cases, the employer does not pay all the costs. Even then, there are often ways to arrange matters as advantageously as possible for you.

An example: the legal costs are paid directly by your employer and set off against your transition payment or severance payment. Your employer can reimburse legal costs in connection with dismissal free of tax, whereas you do pay tax on your severance payment. By routing the costs this way, you effectively pay them out of your gross amount rather than your net income. That can quickly save you a considerable part of the costs.

And if no settlement is reached?

If no settlement is reached, there is in principle no agreement on the reimbursement of your legal costs either. In that case, your employer will in principle not contribute.

An exception is proceedings before the subdistrict court (kantonrechter). If those proceedings are won, the court may order your employer to pay (part of) the costs of the proceedings. In the event of seriously culpable conduct by the employer, the court may also award additional compensation. In practice, however, it rarely comes to that: most cases simply end in a settlement.

What does this mean for you?

• Do not let the costs hold you back. There is a good chance your employer will pay them (largely).
• Do not sign for a reimbursement that is too low. That amount is negotiable too.
• Have the reimbursement properly recorded in the settlement agreement. Agree that your employer pays the costs directly upon receipt of the invoice.