How Do Attorneys Get Paid?

How Does An Attorney Get Paid?

One of the most basic tenets of the attorney-client relationship is the terms of payment. While an attorney will likely discuss the terms of payment during your initial consultation, the following is a general discussion of the way in which payment is likely to work.

What is a Retainer?

Many attorneys, particularly those who charge clients on the basis of an hourly rate, will require an upfront retainer in order to begin working on your case. A retainer is like a deposit or down payment for legal services. In essence, giving a retainer is somewhat like prepaying for the hourly work that you are likely to incur. Once the retainer is spent, most attorneys will require that the retainer is replenished. Whether or not this is required will be discussed in the attorney’s engagement letter. Any amount of the retainer not earned will be returned to you after the representation ends. Bar Associations have strict rules regarding how retainers are kept. In California, for example, attorneys are required to maintain separate client trust accounts, solely for the purpose of holding these funds.

Hourly Payment

Many attorneys work on an hourly basis and bill their time in increments of 6-minute intervals. This means that every hour is divided by ten. Billable time is the time that the attorney is actually working on the case, whether responding to emails or phone calls, engaging in legal research, writing motions, or other work related to the case. Thus, lunch breaks, office chatter, and other such fillers are not billed to the client.

Hourly rates are regulated by Bar Association and state laws and are generally required to be reasonable as compared with other attorneys of similar experience level and practice area.

Contingency Fees

A contingency fee arrangement means that an attorney does not get paid for his or her services until they secure a favorable settlement or win a judgment. The terms of the agreement generally set out what the contingency amount will be. For example, many agreements state that the attorney is entitled to 33% of a settlement and then increases to 40% following trial. Contingency fee agreements can be especially helpful in areas of the law where the client may be in dire need of representation, but cannot afford to pay for a retainer. They are also common in areas where the client is expected to win a large monetary settlement, such as Personal Injury or other litigation, rather than more transactional areas such as Estate Planning.

Costs and Filing Fees

The agreement also sets out whether the lawyer will advance costs (to later be deducted from an award amount), or whether the client will have to pay them as the case advances.

Hopefully, this post demystifies the issue of payment for legal services for those of you that are wondering.

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