Setting Fees and Client Retention

• Author: Michelle Roy McSpurren/Rosemary Bocska
• Pages: 103-147

6

Setting Fees and

Client Retention

Learning Outcomes

After completing this chapter, you should be able to:

• Discuss relevant business considerations to take into

account when setting fees for legal services.

• Understand how to set and charge fees in

compliance with Rule 5 and Guideline 13.

• Identify when it is permissible to charge contingency

fees for legal services.

• Summarize key client retention strategies.

103

Business Considerations When

Setting Fees ....................... 104

LSO Rules for Setting Fees .............. 105

Referral Fees ......................... 107

Fee Splitting ......................... 108

Contingency Fees ..................... 109

Client Retention Strategies ............. 114

Be Interested ........................ 115

Dress Appropriately ................... 115

Be Respectful ........................ 115

Showcase Your Knowledge—

Appropriately .................... 116

Be Involved .......................... 116

Conclusion ............................ 116

Key Terms ............................ 117

Useful URLs ........................... 117

Review Questions ..................... 117

Discussion Questions .................. 117

Scenario-Based Questions .............. 118

Appendix 6.1 Standard Referral Fee

Agreement ........................ 119

Appendix 6.2 Referral Fee Checklist .... 121

Appe ndix 6 .3 Standard Form Contingency

FeeAgreement .................... 124

Appe ndix 6 .4 Standard Form Contingency

FeeAgreement Checklist ........... 137

Appendix 6.5 Non-Standard Form

Contingency Fee Agreement

Checklist .......................... 142

© 2022 Emond Montgomery Publications. All Rights Reserved.

Business Considerations When Setting Fees

For paralegals in Ontario, determining what fees to charge for their services is both a

business management and a regulatory compliance issue. In setting appropriate fees,

paralegals must respond to market demands as well as observe the limitations imposed

by the Law Society of Ontario (LSO).

In the LSO’s Paralegal Professional Conduct Guidelines,1 section 2 of Guideline 13

states a fee is the paralegal’s wage. Fees may be hourly, by stages of a matter, or fixed

or flat; with some restrictions, they may be contingency fees (discussed in more detail

under the subheading “Contingency Fees”). In general, paralegal entrepreneurs must

set their fees at a level where they can, by working a reasonable number of hours,

cover their costs and earn a profit. Setting fees is a matter of individual strategy on the

part of a business, and while conventional economic wisdom suggests that businesses

should market their services at a price level that is similar to that of their competitors,

there are a number of things you should keep in mind when setting fees.

A good preliminary strategy is determining what it costs your business to stay in

business. Cost-based prices generally add a fixed profit percentage to that cost.2 It is a

good idea to periodically assess and reassess the costs you incur in the course of pro-

viding legal services to determine the total cost of operating your business. Among the

expenditures you should consider are overhead, payroll, and materials; these costs are

often underestimated. You should also consider office expenses (such as rent, electric

bills, postage, and telephone and Internet bills), professional licensing fees, insurance,

and any other memberships and/or subscriptions incidental to your business.

Once you have determined a cost-based amount for your services, you should keep

in mind that there is a good deal of psychological subtlety involved in the business

practice of setting final fees. Although the lowest prices may attract more clients in

certain business areas, where professional services—and legal servi ces in particular—

are concerned, clients may not wish to retain a “bargain basement” paralegal. There

is also the question of what value a legal services provider’s expertise, education, and

experience have in the market. You may wish to look into what other comparable

organizations or sole proprietors are charging for similar legal services.

Another aspect of setting appropriate fees is managing client expectations. As

section 1 of Guideline 13 states:

Too often, misunderstandings about fees and disbursements result in disputes over

legal bills and complaints from unhappy clients. Since these disputes reflect badly

on the paralegal profession and the administration of justice, it is important that

a paralegal discuss with his or her client(s) the amount of fees and disbursements

that will likely be charged. It will be to the benefit of all concerned if the paralegal

ensures that the client has a clear understanding not only of what legal services

the paralegal will provide, but how much those services are likely to cost.

When you enter into a retainer agreement, you should first review the details of

the retainer agreement with the client. The fees that the client can expect to pay and

1 Law Society of Ontario, Paralegal Professional Conduct Guideline s (1 October 2014; amendments current to

22October 2020), online: <https:// lso.ca/about-lso/legislation-rules /paralegal-professional-conduct-guidelines>

[the Guidelines].

2 “Cost-Based Pricing Definition” (4 Novem ber 2021), online: AccountingTools <https://ww w.accountingtools.com/

articles/2018/2/25/cost-based-pricing>.

retainer agreement

the contract bet ween the

paralegal and the client that

discusses the scope of wo rk

to be performed , the fees to

be charged, and docum ents

the terms of the paralegal’s

engagement by the client

104 PRACTICE MANAGEMENT FOR PARALEGALS

© 2022 Emond Montgomery Publications. All Rights Reserved.

when they will be required to pay the fees should be made very clear, and a schedule of

fees should be provided to the client in writing. Keeping existing clients and gaining new

ones through referrals depends largely on how well you manage your clients’ expecta-

tions. In order for your clients to feel satisfied with the legal services they are receiving

from you, the financial arrangements must be completely transparent. For further discus-

sion of retainer agreements and a sample retainer agreement, refer to Chapter 8.

Fee collection is a common problem faced by practitioners. It is important to ensure

that your retainer is replenished as needed and that you do not invest many hours in

a matter only to face non-payment of your invoice. In order to reduce the possibility of

misunderstanding or surprise, you should bill your clients regularly and frequently. Your

clients may not realize how quickly legal fees can grow to an unanticipated size.

One way you can deal with this problem is to accept credit card payments, since this

transfers the responsibility for debt collection onto credit card companies. Despite the

monthly fees you will pay for this service, it may be a worthwhile investment.

Hillsburg Stables Inc v Gardiner Roberts LLP3

Even established law firms are not immune to the issue of non-payment of fees. In

this case, the law firm Gardiner Roberts LLP was owed in excess of $80 0,000 in unpaid

accounts (fees and disbursements). This case deals with the firm’s attempt to enforce

security it was granted in order to collect those unpaid fees and disbursements.

Note: The appellant’s name is spelle d incorrectly in the CanLI I citation. The correct sp elling is

Hillsburgh Stables Inc.

LSO Rules for Setting Fees

Beyond the general business management considerations discussed above, Rule 5 of

the LSO’s Paralegal Rules of Conduct4 imposes additional constraints on the fees that

paralegals may charge.

Rule 5.01(1) provides that all fees and disbursements charged or accepted by para-

legals should be fair and reasonable and must have been disclosed in a timely manner.

What is fair and reasonable will depend on factors such as the following (Rule 5.01(2)):

(a) the time and effort required and spent;

(b) the difficulty and importance of the matter to the client;

(c) whether special skill or service was required and provided;

(d) the amount involved or the value of the subject matter;

(e) the results obtained;

(f) fees authorized by statute or regulation;

(g) special circumstances such as the loss of other retainers, postponement of

payment, uncertainty of reward, or urgency;

(h) the likelihood, if made known to the client, that acceptance of the retainer

will result in the paralegal’s inability to accept other employment;

3 2012 ONCA 95.

4 Law So ciety of Ontario, Paralegal Ru les of Conduct (1 October 2014; amendments curre nt to 1 July 2021), online:

<https://lso.ca/about-lso/legislation-rules/paralegal-rules-of-conduct> [the Rules].

CHAPTER 6 SETTI NG FEES AND CLIENT RETENT ION 105

© 2022 Emond Montgomery Publications. All Rights Reserved.