The Lyman Firm | Information & Resources
What Is A Contingency Fee Agreement And How Does It Work?
Most plaintiff-side attorneys (including The Lyman Firm) charge for their services using a contingency fee agreement.
The way these agreements work, is that the attorney does not charge anything upfront or throughout the life of the case and will front all costs that arise throughout the case (i.e. filing fees, expert fees, mediation fees, etc.). At the end of the case, from the amount recovered after settlement or trial, the attorney is reimbursed for the fronted costs and collects a percentage of the total recovery as compensation for their legal services. If the client loses their case and recovers nothing, then the attorney recovers nothing as well (and is also out their time and any costs spent on the case).
The percentages attorneys collect for their fees vary depending on several factors, but are typically around 30-40%. The fee agreement should be very clear about this point. However, it is common to include a sliding scale clause in the agreement that increases the percentage as the case gets closer to trial. This is because the attorney will need to spend significantly more time on the case as the case proceeds. For example, the percentage may be 33% if the case settles before filing the lawsuit, 35% if the case settles after filing but before preparing for trial, and 40% if the case goes through trial.
Here is an example of how this plays out in the employment context:
Client/employee and attorney enter an agreement with a flat 35% contingency fee.
Prior to filing a lawsuit, the employee's attorney sends a demand letter to the employer and begins negotiating for a pre-litigation settlement. Eventually, the employer and employee agree to mediate the case and to split the $10,000 mediator fee. The employee's attorney fronts the employee's $5,000 portion.
The case settles at mediation for $100,000, and the recovery is divided as follows:
$60,000 to the employee/client.
$35,00 to the attorney as fees.
$5,000 to the attorney to reimburse the mediator fee.
The benefit of a contingency fee agreement is that it costs a client nothing upfront to pursue their case and the attorney bears all the risk because they front all costs and spend their time working up the case. This allows people of any means to seek justice. It also has the benefit of providing a clear picture upfront whether would-be-plaintiffs have a decent case, as attorneys are only incentivized to take cases they know they can win. So if multiple attorneys pass on a case, that should be an indication that there are problems with it.
This information is meant to provide a brief overview of this legal topic to give employees a general understanding of their rights. Nothing here is legal advice. There are many nuances in the law and even more in how the law applies to a given situation. If you think you are experiencing any unlawful practices at work, and would like legal advice, please contact The Lyman Firm through the link below.