How Lawyers Get Paid And Questions To Ask
The three primary methods of paying a lawyer, and questions to consider asking about each, are: contingency fee, hourly fee (with or without a retainer) and flat fee.
- Because a contingency fee is a percentage of the damage award, contingency fees usually only occur in areas where there is the potential for the award of large damages, such as liability suits, medical malpractice, personal injury, workers compensation, harassment, and product liability. Lawyers generally only accept a case on a contingency basis when they think there is a very good chance that they will win -- the only question being how much.
- There may be cases where a lawyer will agree to work on an hourly basis plus a contingency fee.
- Lawyers who work on a contingency fee basis take their fee as a percentage of any monetary amount you receive. The percentage generally ranges from 30% to 40%. For example, if the lawyer wins $100,000 for you, and there is a 30% contingency fee, the lawyer gets 30% of $100,000 or $30,000. You receive the remaining 70%, or $70,000.
- There will generally be an additional charge upon winning for any expenses incurred with respect to obtaining the money. For instance, there may be a charge for transportation, printing and copying, investigators, court reporter fees, and expert witness fees. Depending on the arrangement, these charges can come "off the top" before there is a division between the lawyer and the client, or they can come solely from the client's share.
- While the essential feature of a contingency fee arrangement is pay only if you win, the details differ from lawyer to lawyer. Read any contingency agreement carefully before signing. In particular, look for:
- Out-of-pocket expenses:
- Will there be out-of-pocket expenses?
- If so, which of them will you be responsible for in addition to the contingency fee?
- Are those expenses payable if the lawyer loses the case?
- If you have to pay, when will that be?
- Do the expenses come out of the total or just your portion?
- What happens if you become dissatisfied and wish to shift to another attorney?
- What other possible events could affect what you may owe the attorney?
- Out-of-pocket expenses:
- It is unlikely you will find a lawyer who agrees to work on a contingency basis:
- In situations where the potential upside is limited. The upside may come from punitive damages in those limited areas where they are authorized. Punitive damages are meant to punish the defendant in addition to paying what is owed.
- In cases where the governing law in question is the federal law ERISA. ERISA includes many benefit plans offered by employers and unions. Because ERISA limits awards strictly, contingency attorneys cannot make enough money to profit with ERISA cases. (On the other hand, cases involving individually purchased insurance usually come under the state's insurance laws. If the facts and law warrant, lawyers may be able to sue for damages based on bad faith, emotional distress, and other causes of action which can yield substantial settlements for both you and the lawyer).
- Social Security cases before the case comes before an Administrative Law Judge (ALJ). Social Security strictly limits what lawyers can charge. Social Security must be notified of the fee arrangement when you hire a lawyer to appeal a Social Security denial. Social Security lawyers generally work on a contingency basis. Because their fee comes out of the retrospective payments, Social Security lawyers often won't take a case until you are owed at least a year in back payments.
Hourly basis (with or without a retainer)
- Lawyers who work on an hourly basis get paid no matter the result. You will be charged for the amount of time the lawyer works on your situation, and for any expenses the lawyer has to pay with respect to your situation. You may also be charged for the amount of time the lawyer's staff works on your situation.
- Lawyer's hourly rates vary according to where they practice and the level of expertise (and reputation) they possess.
- Lawyers who work on an hourly basis often require what is known as a "retainer." A retaomer is a deposit against the lawyer's charges. With a retainer, the lawyer will track his or her time and expenses and ask for more money as the retainer is used up. The initial retainer is rarely the entire legal fee, especially if the situation has unexpected turns and complications.
- Questions To Ask About An Hourly Basis Fee
- How much is the charge per hour?
- How much is the charge for other lawyers in his or her office that may work on your situation?
- Will there be a charge for non-legal time? If so, for what services, and how much are the charges?
- How much does the lawyer estimate extra expenses will be? For instance, copying costs, messenger costs, court costs, travel costs.
- If the lawyer will travel, does s/he he fly coach, business or first class?
For some legal services such as preparing Wills and other documents, attorneys may charge a flat fee. The fee is likely to vary depending on the complexities involved. For example, guardianship papers for a non-biological child in case you become incapacitated may be more expensive that preparing similar papers for your biological child because the issues with respect to a non-biological child are more complex.
Questions To Ask About A Flat Fee Arrangement
- How much is the fee?
- What does the fee cover? For instance, if the lawyer will use other lawyers or paralegals, is their time included?
- When is it payable? Can it be payable over time? For example, a part at the start, and the remainder on completion?
- Are there expenses you will be liable for in addition to the flat fee? If so, what expenses? How much does the lawyer estimate those charges will be?
- Can the lawyer reduce the fee?