For anyone searching for information on how much a lawyer will cost, the lawyer fee structures seem like a complicated and often misunderstood process. However, rest assured that the number one lawyer fee structure (hourly rate) is pretty straightforward. Here is an explanation of how the different types of lawyer fees are generated.
Lawyer Fee Structures #1: Hourly Billing
Hourly billing is the most common way lawyer fee structures are set up and how most attorneys make their money. The lawyers typically get paid an agreed-upon hourly rate for the hours he or she works on a case until it is completely resolved. This is the most common practice of lawyer fee structures because it adequately assesses all the “behind the scenes” work that goes into the majority of cases – phone calls, research, analysis, etc – that are accomplished whether a case is won or lost. Rates vary considerably per attorney. From lawyers.com:
“Rates may vary anywhere from $50 an hour to a $1,000 an hour or more…Hourly billing rates can often depend on a combination of the lawyer’s professional experience and reputation.”
In addition, law offices may also charge for the time of other legal personnel. For example, hourly billing rates for senior paralegals and legal assistants vary significantly.
Lawyer Fee Structures #2: Referral Fees
Another way lawyers can make money is through referral fees – ie: referring a client to another lawyer. This might happen if a lawyer knows someone who is more experienced with your particular case type. Often the first attorney will asks for a portion of the total fee for the referral. However, there are certain legal restrictions accompany this. According to legalmatch.com:
“The practice of charging referral fees is prohibited in certain states unless the first attorney did some work, the client knew about the arrangement and the total fee is reasonable.”
It is also important to note that only a lawyer can only make money for referrals. Know a great lawyer and want to refer him to a friend — and pocket some dough while you’re at it? Too bad. Lawyers can only pay referral fees to other lawyers, a major flaw in the system, if you ask me. After all, who better to speak on a lawyer’s behalf than his or her former clients?
Lawyer Fee Structures #3: Contingency Fees
Another way lawyer fee structures are set up is through contingency fees – meaning the amount paid is determined by the process or the outcome of the cases’ settlement. These vary greatly depending on the type of case. Typical fees might range from 20% if there is an early settlement to 50% if the lawyer is required to take a case to trial.
Retainers, Flat Fees, and the Other Ways Lawyers Make Money
If a lawyer is a particularly high profile lawyer or considered an expert in his or her field, the lawyer may charge a flat fee for certain types of legal work such as reviewing a contract or speaking engagements. In addition, some lawyers’ fees are based upon a retainer arrangement. Retainer fees can take various forms – in some circumstances, a retainer may translate to a fixed fee paid on a periodic basis to represent a client on routine matters. For example, a corporation may pay a monthly retainer to a lawyer to attend board meetings and to provide advice on day-to-day legal issues.
The Bottom Line on Lawyer Fee Structures
The Joshua Just take on lawyer fee structures? Regardless of how your lawyer’s fee structure works or how you are comfortable with the payment method, your lawyer should always be able to explain the why’s and how’s of his or her payment method. As it says on clementlaw.com, “Lawyers should know, in court, you have to prove your case with competent evidence- if you can’t prove your case, you lose. If the lawyers cannot justify their bill to the client, they would have a tough time in court.”
With over 20 years experience as a lawyer, Joshua Just has extensive insight into the process of how lawyer structure fees work. As CEO and founder of Diversified Investments, he also knows quite a bit about client billing as well. Lawyer fee structures is just one of the topics covered here on his blog.