Paying for Justice (or not)?
Christine, February 22, 2019
Lawyers and their fees are a topic about which many people have an opinion. Litigation is costly and there is no question that engaging a lawyer can be expensive for all parties involved. The type of arrangement a terminated employee has with their lawyer can impact litigation strategy and the ability to settle the case.
There are generally three types of arrangements terminated employees can have with an employment lawyer:
- Hourly rate retainer agreements: where the fee is simply a function of how much time the lawyer spends multiplied by their hourly rate. Typically, this is a pay-as-you-go scenario. Both the client and the lawyer have a vested interest in the matter.
- Contingency fee agreements: where the client pays no upfront legal fees but might pay out-of-pocket expenses such as court fees. The client only pays if the lawyer recovers or wins at trial. The contingency is usually 20% to about 30% of the amount recovered. The lawyer takes the risk on the file but often recovers a fee that is greater than what would be recovered in an hourly agreement. This is a fact that is often misunderstood: clients who hire lawyers on contingencies often don’t appreciate that it may end up costing them more.
- Hybrid retainer agreements: where the lawyer charges the greater of the actual time spent or an agreed-upon percentage of the amount recovered. Here the lawyer can potentially have the best of both worlds –charging the client a monthly fee and then charging a higher fee depending on the outcome.
Lawyers who charge either contingency fees or offer the hybrid method, are attractive to many people because they provide access to justice for little or no cost up front and without any risk. However, most wrongful dismissal cases settle before trial and the financial hit of a contingency fee may be disproportionate to the actual time spent by the lawyer.
The increasing popularity of contingency employment lawyers have changed the legal landscape. Terminated employees appear to have become more litigious because they can afford to. Individuals without any financial risk can sometimes be unrealistic and prolong a legal battle that would otherwise settle. During mediation, the issue of a lawyer’s fee is sometimes a barrier to settlement because the contingency is such a significant portion of the recovery. In some cases, the individual may have been better off to accept the original severance package than to retain legal counsel. This new reality can sometimes create challenges which HR managers with the assistance of their counsel can strategize about and navigate through.