Many attorneys choose the legal profession not solely for financial gain; rather, it provides prestige, belonging and pride in their firm as well as companionship among peers.
Traditional law firm compensation models diminish these feelings and focus attorneys solely on winning cases. We need a new approach to attorney pay.
Hourly Fee
An hourly fee is one of the primary methods by which attorneys bill for their services. Although it’s not the only approach used by legal practitioners, many use various fee structures depending on state law and practice area for effective law firm billing. Effective law firm billing depends on an understanding of an attorney’s hourly rate as well as a reliable timekeeping system.
Experience and expertise are two factors to keep in mind when hiring an attorney, which is why doing research before choosing one is vitally important. A simple divorce may incur lower rates of legal representation costs than one involving complex issues like child custody and alimony payments.
Most attorneys charge clients in six-minute increments and typically provide clients with a billable hours chart that shows exactly how long they’ve been working on a case. This helps avoid overbilling, which could potentially be ethically unacceptable and costly to the firm. They may also delegate tasks to paralegals or support staff that will reduce billable hours further.
Beyond an attorney’s hourly rate, other factors that determine how much a case will cost include court filing fees and expert witness expenses – both of which the client might be required to cover even if their claim fails. In some states, judges decide the expenses on an individual case basis.
Attorneys receive various salaries depending on their job titles and roles in a firm; most typically receive either an hourly rate or fixed salary payment plan. Associate lawyers generally receive an hourly rate while partners and partners-of-counsel are compensated based on client fees they generate for clients while “of counsel” lawyers typically receive a percentage of total firm revenue as their compensation. Furthermore, large firms often offer bonus programs for employees who exceed certain performance benchmarks.
Retainer
Retainer fees are upfront payments made by clients to secure the services of professionals, typically attorneys, such as entry fees. Retainer fees provide assurance of commitment from professionals but do not guarantee all the fees necessary for successful final products or outcomes. Often these funds are placed into trust accounts from which services and costs associated with cases can be drawn upon until “earned”. Depending on the terms of agreement between retainer fee provider and client may unused portions may be returned back into account or even returned back refundable to clients.
Retainers are frequently used in litigation cases as these typically last longer and involve multiple people working on them simultaneously. Furthermore, litigation matters are usually more expensive than non-litigation issues and thus require larger retainers upfront.
Retainers may also be used by clients who require legal services on an ongoing basis for employment law matters or corporate law disputes. Retainers can be paid either hourly or on a flat fee basis; attorneys must still abide by DR 2-110(A), which states they must “deliver to the client all papers and property to which the client is entitled.”
Retainer funds should never be used to pay bank service charges; accordingly, an attorney must carefully manage these funds so they are only drawn upon when earned. It is therefore imperative that they keep track of time billed against their retainer and send monthly billing statements with details on each hour spent working for their client.
Contingency Fee
Contingency fee cases offer victims with limited resources access to legal representation without having to pay upfront fees or expenses, while creating an incentive for attorneys to win their cases, since payment will come only if their efforts succeed.
Contingency fees are most frequently employed in cases involving personal injury, medical malpractice, wrongful death, workers’ compensation and disability claims; however lawyers and clients may use variations of this model for other types of legal disputes.
Contingency fees will depend on various factors, including risk, complexity and costs associated with the case. A more complex and risky case might necessitate an attorney charging a higher percentage from any settlement or award received such as 35%-40% while simpler cases might only need 20%-25% as payment for legal services rendered.
Note that under a contingency fee case, while you won’t owe your attorney hourly rates, all other costs associated with your lawsuit (such as court filing fees, deposition costs and expert witness fees) remain your responsibility.
Contingency fee arrangements offer strong incentives for attorneys to be as successful as possible; however, they also present some drawbacks. They can lead to lawyers working more hours than covered by their contingency fee payment and could give rise to financial incentives to take legal actions that might not be in their client’s best interests – for instance taking an aggressive litigation approach.
As such, there may be situations in which using a contingency fee arrangement would not be appropriate. Depending on the specifics of your case, an hourly fee arrangement might be more suitable and help avoid conflicts of interest.
Fee Division
Fee division refers to dividing an award of attorney fees among lawyers representing opposing parties in one case. It may be accomplished in various ways, such as through agreement among attorneys or by court order or state regulations on fee splitting; it could even be included as part of a settlement or award in litigation; it might even be stipulated as an element of retainer agreements and requirements by state standards for ethical behavior in their state of origin. Regardless of its specific structure, fee division must always comply with ethical standards set out by that state where the lawsuit originated and meet ethical requirements set out therein.
Some states, such as New York, have laws on fee sharing and allocation that should be taken into account when establishing an appropriate compensation arrangement for lawyers. Such statutes may restrict how much can be charged by attorneys, set maximum amounts that can be awarded in cases, require full disclosure among other factors, or otherwise put restrictions on how attorney fees are determined and shared among them.
Law firms typically devise their own systems of allocating hourly and contingency fee payments between associates, partners, and “of counsel” attorneys. While many firms utilize a general timetable for expected progression into higher salary bands for lawyers, firms may opt to adapt these systems as needed and consider qualitative criteria in addition to economic performance when assessing attorney compensation.
Lawyers practicing together within a firm often reach agreements regarding how their client fees will be divided after one partner or associate withdraws from a matter. This may take the form of creating a firm policy, incorporating it into partnership and operating agreements or other legal documents or simply having informal discussions about it. Often this form of fee division can be enforced; however it could potentially violate RPC 1.5(e) or other ethical requirements regarding referral fees.
One risk with fee division schemes such as this one is that it could encourage original lawyers to solicit clients for their successors through advertising or otherwise gathering leads without consideration for quality representation that their successor will provide, potentially creating a cycle wherein referring attorneys gather matters only briefly before moving them on in a disjointed fashion.