One of the first questions that people who need legal representation usually ask is “How much will it cost?” Most times, it’s difficult for a lawyer to answer that question definitively – it depends on the circumstances of the case, the number of hours the law firm spends on the file, and the method that the law firm uses to bill clients. However, clients can ask about how they will be charged for legal services. There are basically three main ways that law firms charge:
- Hourly Rates. Traditionally, lawyers charge their clients by billing by the hour. The lawyer and the client agree to a set hourly rate for the time spent working on the file. The lawyer keeps track of the number of hours spent working for the client and bills accordingly at the end of each month.
The Law Society of Ontario has a recommended fee schedule that is based on experience and that ranges from $350 per hour for senior counsel with more than twenty years of experience down to $90 per hour for work by law clerks or students. However, a survey conducted by Canadian Lawyer magazine reported that there is a large variety in hourly fees based not only on experience (number of years since being called to the bar,) but also on the size of the firm, the region where the firm is located, and the area of practice. The highest fees were charged by experienced Ontario lawyers from large firms practicing in the area of criminal law, some of whom reported hourly rates of more than $900.
There are advantages to this billing method: clients pay only for the time the law firm spends on their file, and it’s also easier for clients to compare fees; they can look at the hourly rates charged and make decisions accordingly.
Hourly fees also have disadvantages, however. Many prospective clients can’t afford to pay a lawyer on an ongoing basis, for example. Another disadvantage is that because the lawyer is being paid by the hour, there’s a built-in incentive to spend more time than necessary on tasks. Before agreeing to an hourly fee, clients can request an estimate (along with a provisional timeline) at the outset of the process, which can help them to know what to expect.
- Flat Fees. Another billing method is the flat fee arrangement (also known as “block fees,”) where lawyers charge a fixed amount for specific services. This type of billing makes the most sense for less complicated matters such as preparing a will, where it’s easy to estimate how much time will be spent on the file. Law firms don’t often charge flat fees for an entire case involving litigation; it’s too difficult to assess how much work will be necessary and how much time will be involved. They might, however, offer to charge a flat fee for each stage of a lawsuit, with the amount of each of the fees determined ahead of time.
The advantage to this type of billing is that the client knows exactly how much they will need to pay in advance of the services provided, and the lawyer knows exactly how much money will be coming in. Disadvantages include the fact that this arrangement incentivizes the lawyer to spend as little time as possible on the task. In addition, because the fee is based on an estimate of how much work will go into each stage, the lawyer can end up being either overpaid or underpaid if they end up spending much less time or much more time than expected on a stage. (Sometimes clients negotiate terms that include a mechanism to adjust the fee if circumstances demand.)
- Contingency Fees. Finally, lawyers can charge fees on a contingent basis, which means that they will not charge up-front hourly or flat fees, but rather, lawyer and client will sign an agreement specifying that the lawyer will take an agreed-upon percentage of any settlement monies the client is awarded. The percentages will vary depending on the complexity of the case, but the Law Society of Ontario prohibits a lawyer from recovering more damages than their client, so a 50% contingency fee is the upper limit.
There are a number of advantages to contingency fee arrangements, including increased accessibility to legal advice for clients who may not otherwise be able to afford to hire a lawyer. Contingency arrangements are particularly useful in personal injury cases, where one person is often battling an insurance company with huge resources. In addition, with contingency fees, clients know that their lawyer is highly motivated, since the lawyer doesn’t get paid until the client’s case reaches a successful conclusion.
Before choosing to work with a lawyer, make sure you understand how and when you will be billed for legal services. If you’ve been injured in an accident, talk to a personal injury lawyer today and learn more about your options.