Summary: This article explains concepts related to fee shifting in the US and how those rules affect not just attorneys, but their clients too
Legal representation can be expensive. Because of that, rules about who pays an attorneys’ fees can matter a great deal. In the United States, unlike most other countries, the default rule is that each party in a dispute pays for their own attorney from beginning to end. In the United Kingdom, by contrast, the default rule is that whoever loses a lawsuit has to reimburse the other side for what they paid their attorney.
But the “American Rule” has a problem: it can make it much less affordable for the average American to pursue a lawsuit for any length of time. Either they are paying by the hour without any hope of recovering that money later, are unable to find an attorney at all because no one wants to take their case, or if on a contingency fee arrangement that can still mean they come away with less even from a winning case.
Lawsuits don’t just help the plaintiff who wins them; they can also spur societal change or serve as a method of regulation. As a result, Congress and state legislatures have passed various laws with “fee-shifting” provisions in order to incentivize certain socially-important lawsuits. Basically these are provisions that allow a winning party (usually just the plaintiff) to recoup their attorneys’ fees after the fact. Many of the laws that have such fee-shifting provisions are employment or civil rights laws. Major examples include Title VII of the Civil Rights Act of 1964 or the Family and Medical Leave Act.
In Texas, many contract disputes also allow for fee-shifting by default. In years past it was the case that if your employer was an LLC it could avoid that rule even if you proved it violated its contract with you—a loophole that was fortunately closed in 2021. Similarly, if your employer sued you for breaching a non-compete that was unreasonable and overreaching as written, you might be able to recover attorneys’ fees even as the defending party.
However, not all employment laws have fee-shifting provisions. For instance, some Texas laws, such as the one prohibiting retaliation for using workers’ compensation benefits, have been interpreted to not allow recovery of attorneys’ fees. Suits for employment torts like interference in business relations or defamation also still apply the American rule. Some employers may try to get around fee-shifting by forcing their employees to sign contracts (like arbitration agreements) that claim to negate it. More conservative judges might be open to those sorts of arguments. Similarly, conservative-minded judges have been known to refuse to award a winning plaintiff their full attorneys’ fees if they didn’t win “enough” money in the underlying lawsuit.
In addition, there are circumstances in which employers might retaliate against an employee pursuing their rights by trying to force them to pay the employer’s attorney fees. They might bring an “anti-SLAPP” motion claiming that your lawsuit is infringing on their First Amendment rights somehow, or might try to claim your lawsuit is frivolous or in bad faith. Either of those might allow an employer to penalize an employee who sued them, although they may just do it as a scare tactic. In particular, employers routinely claim any and every lawsuit against them is frivolous, but rarely convince a judge of such arguments.
It can be important to understand the concept of fee shifting when deciding whether it makes financial sense to pursue a case. If you are concerned about being able to enforce your rights under civil rights or other employment laws, you should talk to an employment attorney like those at Rob Wiley, P.C.