Employment Law Contingency Explained
Employment law on a contingency basis means that you don’t pay the law firm an hourly fee for their services. Instead, if your case is successful at trial, you are charged a percentage of the final award or settlement. Of course, the amount of this percentage is negotiable, but the general rule is that employment law is a 33 1/3% contingency when the case goes to trial. An employment law settlement is typically 25%. If a claim is successful on appeal, the fees go up for the appeal and for the trial level work, in most cases to 40%.
In regard to a contingency fee, a lawyer is taking a risk. They’ll only be paid if they win and recover money for their client. On the other hand, the client only pays in a successful case. There are other arrangements that can be made, such as a retainer. But traditional hourly fees are not very common for a few reasons. First, the initial retainer may be difficult for a client to provide . Second, hourly fees can be incentivize an attorney to "stretch out" a case. With a contingency arrangement, there is motivation for the attorney to get a case settled or to an eventual trial as soon as is practically possible for the client. Another point to consider is that a contingency arrangement can reduce the risk for a client. In general, going up against a well-funded employer or consumer manufacturer can be difficult without an attorney. Cases can be complicated and expensive to prosecute. An hourly fee would create a situation where the client would feel as though he or she is throwing money away over a long litigation period, especially when he or she is not the one who is receiving the money based on a settlement or verdict. A law firm with an hourly fee structure might have to sell a potential client on the idea that the case is worth the money, but a firm that operates as a contingent counsel can just tell the client that the firm has skin in the game as well.
Type of Cases Appropriate for Contingency Fee Agreements
When discussing employment law on a contingency basis, some may wonder what types of cases attorneys commonly handle under this payment arrangement. For a variety of reasons, the most common type of employment law litigation taken on contingency is wrongful termination. This type of litigation typically results from a situation in which an employee is discharged from his or her employment due to age, race, gender, ethnicity, sexual orientation or religion, as well as any other characteristic legally prohibited from forming the basis of an employment decision.
Another form of employment law litigation handled by attorneys on contingency are discrimination lawsuits. Oftentimes, discrimination lawsuits arise from an employee who has worked for extended periods of time for an employer. In such a situation, the employee could be terminated, even if he or she is fully qualified to perform the job in question. Likewise, the employee could be transferred to another position that is either lesser in rank or lesser in pay, or even to a new position that is designed to be less favorable for the employee. A discrimination attorney may represent you in a discrimination lawsuit, which would be filed against the employer for taking such action against you.
In addition to wrongful termination and discrimination, wage and hour disputes also tend to be handled in the civil courts. Such a dispute may concern over and/or underpayment of wages, as well as withholding of overtime pay. While wage disputes were handled primarily in state courts prior to 2005, federal courts assumed jurisdiction in the past decade. Employees have thus filed claims against employers in either the state or federal systems. Contingent on the case in question and whether the elements of a wage and hour dispute are met, a contingency representation may or may not be warranted.
Advantages of Contingency Fee Agreements in Employment Law Cases
Employment law attorneys and clients can have a mutually beneficial relationship with the use of a contingency basis agreement for employment law cases. Most attorneys will evaluate and accept cases on a contingency basis to ensure that the case is litigated and a fair settlement is ultimately received by the client. The way that contingency fee agreements are structured is that the law firm is paid a percentage of the total settlement amount at the end of the case or litigation. Because of the nature of the agreements, clients will not have to worry about up front legal fees because they will not be charged until the case is settled and the client has achieved the final recovery amount.
Attorneys benefit from the contingency fee model by receiving total payment plus a percentage of the total amount awarded to the client should the case be settled successfully. But, the law firm must put in the same effort and work whether they know the case will win or lose. Since there is no upfront payment, a law firm will only achieve payment when a case is settled successfully.
Disadvantages to Contingency Agreements
There can be downsides to a contingency agreement. What most people do not know is that because the lawyer is going to take a percentage of the ultimate recovery, they can end up being the most expensive way to get a resolution for your case. Often the recovery will be higher than had they paid hourly, but the hourly fee might be much lower. There is also the possibility that a case will go on for a long time or get complicated. This may result in higher fees for the lawyers during the case and, therefore, a higher fee once the case is settled. For example, if a case takes three years to go to trial that is three years in which you are not receiving money, but you and your lawyer are spending time and money in preparing and trying the case. Should you prevail, your lawyer will now take a percentage of the higher judgment, instead of one based on the value of the original claim upon which you started. This is not to discourage a contingency agreement. Just make sure you understand what the percentage or fee will be and how it will escalate if you end up spending more time fighting the battle than was originally anticipated. Always consider whether the time spent will result in a higher fee and, if so, whether the amount of time you spend limping along for the next few years or fighting with an insurance company is worth that extra money.
How to Select your Attorney for a Contingency Case
Making the right choice of lawyer for an employment law case to be handled on a contingency basis is no different than making the right choice for an employment law case to be handled on an hourly basis. You need to have trust in your lawyer and that they will do the right thing while representing you.
The level of service and expertise received should be the same. Trust your gut instinct. In most cases, the contingency relationship is a long and sometimes hard one, so you have to be able to talk to the lawyer about anything. If you are not comfortable talking to them (from your very first meeting), that is a sign that perhaps they are not the right lawyer for you – as well as not being the right lawyer for a contingency case. Remember, you are hiring a professional to represent you, so that they can handle issues which you cannot handle on your own. If this lawyer cannot establish a trusting relationship with you , it usually means that there is a disconnect that could harm you as the case evolves.
One key factor in making a decision is to select a law firm that has experience handling cases, but also can point to other similar cases in which they have an established track record of success, especially if your case is similar to another case handled by the firm. Of course, because most claims are subject to a confidentiality agreement, the firm may not be able to disclose the case name, but they will be able to discuss the case generally. The firm should also be able to explain to you how many years they have handled similar cases. Firms who have only handled a few similar cases may not be the right fit for you.
A firm who goes with the flow to get an engagement is not for you, because if they cannot explain the engagement terms to you, or try to explain some perceived unusual term in order for you to sign a retainer, you may not be able to trust them as the case progresses.
Money Implications Explained
There are competing financial considerations for the lawyer and the client in a contingency arrangement. The client has to consider the portion of the recovery that will be lost to the lawyer as a fee and that typically runs in the range of 25 percent to 40 percent of the gross recovery. The lawyer wants to maximize his fee within the bounds of the law and the ethical rules that permit his collection. Statutory limitations on attorney fees typically range from 30 to 40 percent of the recovery and various cases have developed common law rules that limit the attorney’s fees available to 30 percent of awards that apply outside the statutes. The financial considerations that will arise in the course of the representation may require the assistance of the lawyer, but may not. Often medical providers assert liens against a recovery from a personal injury. In no border state can the medical provider take more than the client and the contingency lawyer. Costs are often incurred in the course of the litigation.
Examples of Successful Contingency Cases
One of our successful contingency cases involved an HR employee that was sexually harassed by her boss. After a year of investigating the situation, we were able to take her case on a contingency basis (due to her limited income). Ultimately we were able to negotiate a six-figure settlement with her former employer. Another recent example of a successful case was on behalf of a physician that was underpaid $90,000. In most of our contingency cases, the company’s lawyers quickly realize they are on the wrong side of the issue and settle quickly. This case was somewhat different; the company’s insurance company forced their lawyers to fight on the issue. Through lengthy negotiations, we were able to build up so much damage and interest, that the physicians’ former employer ended up paying more than 2.5 times the amount owed just to get out of the dispute . Luckily for us, the physician’s family had enough savings to wait for the right opportunity and the insurance company got a bargaining lesson in the process. A third example is a group of servers that were denied overtime. In this case, we represented a group of 10 servers at a restaurant. Their employer denied them overtime and the servers were getting paid $4.75 an hour plus $50 a day in tips. This employer was paying under what no one could survive on. With a combination of stalemate negotiations and litigation, we settled the case for six figures. When taking on a case like this, it’s important to let the case unfold naturally and not force it into litigation unnecessarily. Without going into great detail about the case, with some orchestrated delay on our side and patient timing, the deal was ultimately good for the clients.