Can You Get a Cash Advance on an Employment Lawsuit?

By Michael Shemtoub, trial attorney, Beverly Law. Updated November 2026.

The agency step comes first

Under the federal laws the EEOC enforces, you generally must file a charge within 180 calendar days of the discrimination, extended to 300 days where a state or local agency enforces a law against the same kind of discrimination (EEOC time limits). Once you receive a Notice of Right to Sue, “you must file your lawsuit within 90 days” (EEOC, Filing a Lawsuit). Equal Pay Act claims are the exception: you may go straight to court within two years, or three for willful violations.

States run their own systems alongside the federal one:

These deadlines are short, and missing one can end a claim on procedure alone. A claim still sitting at the agency also gives anyone reviewing it, a funder included, less to judge by than a filed lawsuit. If the claim is lost or dismissed, a non-recourse advance would normally leave you owing nothing, but read the exceptions described on what happens if you lose your case.

Most of the money is taxable

Injury settlements are often tax-free because federal law excludes damages for personal physical injuries. Employment settlements usually fall outside that rule. The IRS says the part of a settlement for lost wages, “severance pay, back pay, front pay,” is “taxable wages,” subject to employment tax withholding. Money for emotional distress that does not come from a physical injury must be included in income, and punitive damages are taxable (IRS Publication 4345).

There is one help on the fee side. Federal law lets a taxpayer deduct attorney fees and court costs paid “in connection with any action involving a claim of unlawful discrimination,” up to the amount of the recovery included in income (26 U.S.C. 62(a)(20)). We found no IRS guidance saying a funder’s charges qualify for that deduction. A tax professional should look at your numbers; see also is a lawsuit advance taxable.

Example only, with round hypothetical numbers: a $60,000 settlement is split evenly between back pay and emotional distress. Withholding comes out of the $30,000 wage portion when it is paid. A funder whose contract payoff has reached $8,000 is owed that amount whatever the taxes are, so the payoff takes a larger share of what you actually keep than the headline number suggests. Your settlement papers, your fee agreement and the funding contract decide the real figures.

Fee awards can change the math

Employment statutes often let a winning employee recover attorney’s fees from the employer. In California the court may award the prevailing party reasonable fees and costs, but a winning employer gets them only if the action was “frivolous, unreasonable, or groundless when brought” (Gov. Code 12965(c)(6)). Texas lets the court allow the prevailing party a reasonable attorney’s fee (Lab. Code 21.259), and Washington’s statute includes “reasonable attorneys’ fees” in the civil action (RCW 49.60.030(2)). How a fee award is credited under your own fee agreement affects how much is left to repay any advance.

Arbitration agreements

If you signed an agreement to arbitrate disputes when you were hired, your claim may be heard by an arbitrator instead of a jury, on the arbitration’s own schedule. For sexual harassment and sexual assault disputes, federal law lets the person bringing the claim choose not to be bound by an arbitration agreement or class-action waiver signed before the dispute arose (9 U.S.C. 402(a)). A funder may ask to see any arbitration agreement. Before sending it, or any other case papers, read about funding and attorney-client privilege.

What to ask before you sign

• Which agency has your charge or complaint, and on what date was it filed?
• Do you have a right-to-sue notice yet, and what deadline does it set?
• Did you sign an arbitration agreement, and does the 9 U.S.C. 402 election apply to your claim?
• How much of a likely settlement would be wages subject to withholding?
• How does your fee agreement treat a court-awarded fee?
• Have you looked at other options first? See alternatives to pre-settlement funding.

State funding laws are in the laws by state table, and the rest of the section starts at the lawsuit cash advance guide.

Common questions

Related pages

Cash advance on a lawsuit · Laws by state · Injury law FAQs

Important: This page is general information, not legal or medical advice, and reading it does not create an attorney-client relationship. Every case is different; talk to a lawyer about yours. Texas cases are handled by the firm’s Texas-licensed attorneys, Joyce Ondich and John Efstathiou. Last reviewed: November 7, 2026.