Update as of February 2, 2017, The Ivancie Law Practice is no longer taking any new contingent fee federal discrimination cases. We apologize for any inconvenience.
Do you have an employment case, but no money to fight it?
Then hiring an attorney on a contingent fee basis is probably the best option for you.
Contingent fee agreements are used in many types of employment law cases. Especially, cases where the underlying law allows for attorney’s fees or where the claimant (you) is likely to get a monetary judgment (award) against the other party. These types of cases include discrimination cases, Whistelblower cases, pay and leave cases, and some discipline and wrongful termination cases. You can read more about those types of cases at our Employment Law Guides section.
My practice takes contingent fee cases. If you are interested in learning more about this type of fee arrangement continue reading.
Below are some common questions and answers related to contingent fees in employment cases.
What is a contingent fee?
A contingent fee means that the attorney handling your case doesn’t charge you anything for the time they spent working on your case, unless you win. Their pay is contingent on you winning. Typically, if they do win your case they get between 20%-40% of the total recovery.
What if I lose my case?
Typically, if you lose you do not owe the attorney anything for the time the attorney spent working on your case. Attorney’s, however, cannot promise to pay the costs of your case for you (filing fees, expert witness fees, etc.). See Cal. Rules of Prof. Conduct 4-210. So in some instances, you may have to pay the costs associated with fighting your case. Make sure you discuss this arrangement with your attorney when you enter into a contract with them to avoid being surprised later.
What if I win my case?
Congratulations! You likely signed a fee agreement with the attorney and it will control how any award is disbursed. For example, lets say you entered into a contingent fee agreement with an attorney where the attorney would keep 33% of any recovery you got and the judge awarded you $30,000 in your discrimination case. The attorney would be entitled to $10,000 (1/3) and you would keep the remaining $20,000 (2/3).
How can costs affect my award in a contingent fee case?
This is a very important, and often overlooked, issue. Costs can add up in any case. It is important that you agree beforehand with your attorney regarding how costs will be paid for if you win your case. The reason this is so important will become very clear with the two illustrations below.
Lets say you win your case and get an award of $30,000. You and your attorney agreed he/she would get a third (33%) of any award. Let’s also assume there were $5,000 in costs. Great. So you’re thinking you are entitled to $20,000, right? Well, it may depend on when costs are taken out.
If costs are taken out before the contingent fee:
The split will look something like this: $30,000 (award) – $5,000 (costs) = $25,000. In that case $25,000, not $30,00 will then be split 66% for you 33% for the attorney.
Then the attorney gets: $8,333.33 (1/3 of $25,000)
You get: $16,666.66 (2/3 of 25,000)
If the fee is taken out first then costs are taken out:
Now lets say the agreement stipulates that the attorney gets his/her 33% first then costs are taken out with you getting the rest. In that scenario:
The attorney would get $10,000, a third of $30,000.
You would get $15,000. ($20,000 remaining minus $5,000 in costs).
See how there is a fairly significant difference between the two recoveries?
It is important you agree beforehand how costs will be taken out because as costs increase, it can greatly affect the amount of money each party ends up actually receiving.
What is a reasonable contingent fee?
Unfortunately, the answer is: it depends. An honest attorney will look at a number of factors when they determine whether to take your case, and the fee to charge. Some of those factors include: the amount of time your case will take to prosecute, the complexity of your case, the strength of your case, the likelihood of winning, and the prevailing rates in local legal community.
To illustrate, if you have a very complicated case with significant factual issues and legal hurdles that will require a great deal of briefing and effort by the attorney, the contingent fee percentage is likely to be higher. Moreover, if you are in a high cost-of-living-area like San Diego you are likely to be charged more.
We won my case, but now I think I paid too much, what can I do?
Generally, you are bound by the terms you entered into when you signed the original fee agreement. The main exception would be if the fee paid was grossly disproportionate to the amount of work done by the attorney. The ethics rules for attorneys require that the fees they charge not be unconscionable. See Cal. Rules of Prof. Conduct 4-200 What is unconscionable is determined on a case by case basis. But if your attorney only worked on your case for 5 hours and got a settlement for $500,000 and is trying to take a third–that would be unconscionable. The hourly rate equivalent would be around $33,000/hour which is beyond absurd.
If your case resolves quickly for a high recovery your attorney should be open to reducing their contingent fee percentage so the fee is not unconscionable. Just ask, and point them to the ethics rule cited above.
What about cases where you can get attorney’s fees awarded?
So, some statutes allow for the recovery of attorney’s fees if the claimant (you) is victorious in their case. For example, the federal Whistleblower Protection Act, provides for the award of both reasonable attorney’s fees and costs if you win your case before the Merit Systems Protection Board. See 5 U.S.C. 1221(g)(2).
What this means is that your attorney can attempt to recover their actual time (hours expended) at their hourly rate. So, for example, if they spent 100 hours on your case and their typical hourly rate is $400 they will seek $40,000 in attorney’s fees.
Can I (the client) keep some or all of the awarded attorney’s fees?
Typically, no. If a statute allows for attorney’s fees, any fee agreement you enter into will likely stipulate that the attorney’s fee award will go to the attorney. Moreover, there are ethical rules that prevent attorney’s from sharing legal fees with non-attorneys. See Cal. Rules of Prof. Conduct 1-320. As to the disbursement of other awards along with attorney’s fees, that is up to you and your attorney. Since contingent fee cases are risky and could easily result in no payment for the attorney, in some instances, the attorney may require that they get part of any recovery you get along with attorney’s fees to compensate them for the risk in expending all that time on your case.
Why won’t an attorney take my case on contingent fee?
If you have visited multiple attorneys and they have all declined to take your case on a pure contingent fee basis, it may be because you do not have a strong case, or that the statute under which you have a cause of action limits your potential recovery. Or, it could be for a host of other factors.
A simple illustration of the financial calculus that goes on when evaluating a contingent fee case is as follows. If an attorney knows the most you can recover is capped at $10,000 and they will easily spend $20,000 of their time on a case–that’s a losing proposition for them and you, so they won’t take your case. Again, there are many factors that go into the decision of whether or not to represent an individual, some of which have nothing to do with you, or your case, such as their current workload or familiarity with the specific area of law your case relates to.
What is a hybrid fee arrangement?
A subject that warrants an article all its own, hybrid fee arrangements are fees where the attorney and client agree to both a contingent fee and some other fee such as a flat rate or fixed fee. One potential arrangement is where a client agrees to pay the attorney a flat fee for taking their case, but in an amount much smaller than the attorney would get if they billed the case hourly. In return, the client also agrees the attorney will get a percentage of any recovery should they win the case. This arrangement can be very beneficial to both parties because it assures the attorney they will get minimal compensation for their work while still providing an incentive to win the client’s case. It is beneficial to the client because that upfront flat fee may get an attorney to take their case when they wouldn’t have if the case was purely based on a contingent fee. I have moved to using hybrid fees fairly often. I find these types of agreements can be negotiated to a point where they benefit both parties.
Wrapping up: Five things to remember about fee agreements
- Fees are negotiable, discuss and work out the details.
- Think about the possible scenarios that could occur, even the remote ones, when you are negotiating a fee agreement.
- People respond to incentives, contingent fees align the parties’ interests. Aligned interests are a good thing.
- Paying a big contingent fee to your attorney is actually a good thing, it means you won a big award and your attorney did a good job.
- Contingent fees help people get representation when the otherwise wouldn’t. Just because you do not have money, doesn’t make it legal to discriminate against you, wrongly terminate you, or deny you a reasonable accommodation.
I hope you found this information about employment-law fee agreements helpful.
