Thursday, August 30, 2007

How Employment Lawyers Charge Their Clients

Employment lawyers work to earn money. When an employment lawyer is evaluating a case his or her eyes are on the bottom line. "Can I service my client while making a profit?" is the question we are asking. Many cases come with laudable rewards in addition to money, including working to attain a measure justice for our clients. But do not kid yourself: lawyers work for money.

There are four ways a lawyer can charge: by the hour, on a flat rate, on a contingency-fee basis, or some combination therof. Choosing how to charge involves an evaluation of risk for both the attorney and the client.

Hourly billing -Most risky for client; Least risky for attorney.

The attorney keeps track of his or her time and send the client a bill for the hours worked. Because liability often is not readily apparent in employment law cases, many employment law attorneys require that the initial phase of the attorney-client relationship be based on hourly billing. In purely defensive cases, such as when an employer is claiming my client is violating a non-competition agreement, hourly billing is often the most rational choice. (Much has been written about hourly billing variants, such as value-based billing. I am keeping it simple for this article.)

Flat Rate -- Moderately risky to the client; Moderately risky to attorney.

Employment lawyers bill a flat rate for certain discrete tasks. For example, I have processed federal employee disability retirement applications on a flat rate. The client pays a set fee and does not need to worry about the amount of time I am spending on his or her matter.

Contingency Fee -- least risky to the client; most risky to attorney.

The attorney only recovers a fee if the client wins. For this reason, most employment attorneys will not consider a pure contingency fee relationship unless the employer's liability and ability to pay are clear. I generally only consider pure contingency fee arrangements in overtime, unpaid commissions, and accrued vacation pay cases.

Combination of Hourly, Flat Rate, and/or Contingency Fee.

The lawyer and client and agree to any combination of the above. For example, the lawyer and client may agree to hourly billing until the bills reach a certain dollar amount and then agree to convert the matter to a contingency fee relationship. The possibilities are infinite and require careful analysis of the merits of the claim and the possibility for settlement or success at trial.

2 comments:

Jimmy said...

Wondering: On an unpaid sales commission case where there's a mandatory arbitration clause, what would be the fee range for a contingency fee arrangement charged in the case? (%) I realize it may vary...but am wondering what is typical overall and specifically with your firm. I don't need an attorney yet.....but am starting to shop the case.

Thank You.

James Edward Rubin said...

Assuming a lawyer is willing to take your case on a pure contingency-fee basis, I have seen the percentages range from 10-40%. It all comes down to the strength of your case and the likelihood that it will be a profitable venture for the attorney.