Thursday, June 27, 2013

How much do lawyers cost?

Many employees who are wrongfully dismissed have had few, if any, dealings with lawyers in the past, and usually their experience will be with their wills (hopefully) and real estate, which often involve fixed rates.

But when you've been dismissed, it's harder to anticipate what the cost will be.  In this entry, I'll survey some of the issues that can affect the cost of hiring a lawyer, and some of the fee arrangements that some lawyers offer.

Before I get into details, let me say that I'm not going to publish figures here, and they vary from place to place, but many lawyers will offer free consultations.  I do so in many dismissal cases, and encourage dismissed employees to contact me.

Fee Arrangements

Hourly Billing

For most lawyers, cost is fundamentally premised on the hourly billing model, even though there are alternative fee arrangements available in many cases.  Fundamentally, a lawyer says, "I bill x dollars per hour, plus disbursements and HST, so it all depends on how many hours I have to put in."

It is understandable for a client to be dissatisfied with this explanation of fees.  How many hours will it take?  Surely the lawyer is in a far better position to anticipate that then the client, no?  Well, that's kind of a "Yes and No", because while I may know how long a given task will take, to a large extent the number of hours required will depend on factors outside of my power or knowledge.  If the parties approach negotiations reasonably and in good faith, I am often able to resolve the file in the single-digit hours.  But if the employer plays hardball or takes unreasonable positions, and/or if litigation is necessary, then it gets a lot more expensive a lot more quickly.

When you hear about a lawyer charging hundreds of dollars per hour, the initial instinct is to be shocked, because when you measure it by contrast to usual hourly wages, it just seems sky-high.  The point of this entry is not to justify hourly rates, but allow me to say that lawyers don't generally take home hundreds of dollars per hour.  Lawyers have to pay rent, staff, office expenses, professional insurance and dues, and not all hours are billable.  There's a lot of overhead.

Contingency Fees

Contingency fees used to be illegal in Ontario.  They're permitted now, and have become par for the course on personal injury, and they're occasionally seen in employment law.  In a nutshell, that's the "You don't pay me unless I win you money, in which case I'll take a percentage."

I don't usually do contingency fees.  I have occasionally, but there are a lot of difficulties with them, not the least of which is that there are enough other percentages coming off the top of wrongful dismissal damages (such as taxes) that it makes the client's take-home pretty marginal.  Sometimes I'd be undercompensated, if the matter goes to trial.  Sometimes I'd be overcompensated, if it settled quickly.  From a business perspective, this will ideally balance out.  But from the perspective of a client who has to pay a sizeable portion of the package for a relatively small amount of work, it will seem unfair.

There are other formulations of contingency fees - percentages that vary depending on when the file settles, premiums for achieving a specific result, etc. - which I don't generally dabble in.

Other Alternatives

There are a few other variations, payment plans, etc.  One which I like is the 'half-and-half' retainer, which provides that half of the fee is billable as the work progresses, and the other half is billable after the matter is complete.  For a dismissed employee who has lost his source of income, this makes the legal fees more bearable until the damage award is achieved.

Some lawyers do flat fees on an a la carte basis - so x dollars for a statement of claim, y dollars for discoveries, etc.

But the reason I prefer hourly billing is this:  The way that lawyers will calculated contingency fees or flat fees is with reference to the number of hours they generally expect the task to take, and the hourly billing rate they would charge.  To the extent that they're giving their clients more fee certainty, there will generally be a premium paid for that certainty, simply because lawyers are rational business-people.  They will pick a rate that will, more often than not, get the equivalent of hourly billing.

What factors affect cost?

Different lawyers charge different hourly rates.  Expertise, area of law, geographical region (and local market conditions) have an impact, but the single most important factor which defines most lawyers' rates is the length of time 'at bar' - i.e. how long they've been lawyers.

However, I'd suggest that it is not necessarily the case that you will pay less to a junior lawyer than a more experienced lawyer.  In theory, the junior lawyer's reduced rates reflect the reality that they may take more time to produce the same quality of work.  But the key thing to remember is that specific experience is important.  I practice a lot of employment law.  I know the framework very well and keep on top of new developments in the law.  In an initial meeting with the client I can explain the framework, explain entitlements and obligations, and even tell the client where the uncertainties are.  A lawyer without a lot of employment law experience will have to figure out the framework, and have to do research into the specific issues raised in the fact pattern, to a much greater extent than a lawyer who is intimately familiar with the area of law.  And that isn't necessarily a question of overall experience - I have dealt with senior and highly competent litigators, billing more than double my rate, who wouldn't know (without research) what factors are usually relevant to a common law reasonable notice period.

One thing that drives up costs really quickly is when parties start taking unreasonable positions.  To be clear, there are cases where the parties can reasonably be far apart because of legitimate questions as to how a Court might apply the law (particularly when you're in the grey area cases for just cause, constructive dismissal, enforceability of written contracts, or a handful of other scenarios), but in the vast majority of cases, two reasonably experienced employment lawyers will come to pretty similar conclusions about likely entitlements, leaving relatively little to fight about.  That's why most matters settle.

It's where you get a lawyer who doesn't know what's reasonable, or a client who doesn't act on what the lawyer says is reasonable, where you start getting into more difficult negotiations, requiring steps to be taken to litigate.  And throughout litigation, that remains true.  Two experienced employment litigators, if they want to, can often narrow the issues in such a way that the matter can be brought to trial with a minimum of expense.  However, if you have to fight over what productions are reasonable, what questions should be answered on discovery, and myriad factual and legal questions of arguable importance, then you start getting into a lot of 'off-shoot' fights - motions, multiple examinations, etc. - all of which drive up fees significantly.

To be clear, this isn't to say that all expensive fights entail someone acting unreasonably.  After all, the common law is developed by people bringing serious questions to be determined by a judge in a robust adversarial process.  So that's the other thing that can require more money to be spent, or else more significant compromise:  If there's an 'all-or-nothing' question, or something close to it, in serious contest, that makes it harder to settle.  For instance, for a question as to whether or not an employee is tied to the terms of a written employment contract, the difference could be as stark, in the right case, as between 8 weeks of pay in lieu of notice and 104 weeks of pay in lieu of notice.  "Just cause", likewise, is a high threshold, which is the difference between the employee getting nothing versus getting full common law there can often be a legitimate question as to whether or not misconduct quite meets the standard.


This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

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