Litigation finance is a practice in which investors fund a lawsuit. If the case is successful, the investors are entitled to receive a certain amount of the award. If the defendants or plaintiffs lose their cases, they do not repay the funding. According to some legal experts, this practice may be used more often in future employment and labor cases in Pennsylvania and across the U.S.
The practice is more common in big commercial disputes, but there are many times when it could be beneficial in employment and labor litigation. This is because the availability of funds could help close the financial gap between two parties in a salary and wage dispute. It could even help convince lawyers to take employment cases that are likely to be successful but long. Additionally, litigation finance may help prevent workers from rushing into lower-paying settlements.
One example of how litigation financing could help in labor cases is if there is a dispute over severance pay. High-level workers who own equity in companies might need funding for the lengthy legal action that they pursue to obtain the severance pay after leaving their employers. In another example, a group of workers might need funding to sue in a dispute over pensions or unpaid overtime earnings.
The downside in some cases is the percentage that litigation finance firms charge. In some cases, the interest rates range between 12 and 19 percent.
Deciding to ask for litigation finance assistance can be a difficult decision. It is important to consider that employers could rely on litigation funding as well. An employment law attorney may advise a client on the best approach to a case.