Having spent almost a decade managing a 6- to 7-figure legal budget inside a large government organization has sensitized me to the ever-increasing rates being charged by lawyers in Canada, particularly those working inside large downtown offices in major cities.
As a solo practitioner, I routinely meet individuals, business owners/executives who complain about legal fees and lawyers’ insensitivity to their clients’ budgets. Clients invariably offer an anecdote or two about a bad billing experience. There is the one about the lawyer who surprised the client with an unreasonably high invoice for a simple task; where the lawyer charged them for time spent sending a promotional email; and, I particularly like this one which I have heard several times, the lawyer who charged for time spent correcting his own mistake!
It doesn’t have to be this way. Clients who want to manage legal fees, whether large or small, have a variety of strategies available to them to ensure they get a good lawyer while also ensuring they are treated fairly and there are no surprises when it comes to billing.
Below are a few recommended strategies.
1. Shop around and negotiate legal fees
Shop around before hiring a lawyer.
There are a lot of lawyers in Canada and the legal market is competitive. Before hiring a lawyer, talk to at least two lawyers and ask for their rate and billing standard. The hourly-based approach is giving way to alternative billing models so clients should discuss the availability of different billing models. Find out if the lawyer has special fixed-rate packaged services. If the scope of work is not defined, ask the lawyer for an idea of the scope of work and range of legal fees before the work begins to avoid surprises down the road.
Where fixed rates are not possible, establish a budget estimate before signing a retainer agreement and agree with the lawyer that variances from the budget will be flagged to you before the scope or budget changes. As a client, you deserve as much certainty as reasonably possible when it comes to cost.
Watch out for law firms that charge additional fees for secretarial time and for photocopies. Increasingly, sophisticated clients are insisting that these be included in the firm’s overhead.
2. Look beyond the traditional law firm
Gone are the days where good lawyers could only be found in fancy downtown offices equipped with large libraries.
The world of solo and small firm lawyers is growing thanks to the evolution of online tools that facilitate running a legal practice from your desk. Lawyers don’t need access to a big library of law texts and hardcover caselaw publications anymore … today this is literally all at their fingertips.
Because it’s becoming easier for lawyers to strike out on their own, we’re seeing big law firm lawyers leave the firms in notable numbers to hang up their own virtual/non-virtual shingle. Some for work life balance reasons, others because they have become disillusioned with the competitive law firm environment and others because they are not able to sustain a practice based on the hourly rates the firm required them to charge.
As a result, clients now have access to an increasingly large pool of deeply talented and experienced lawyers who operate outside the big law firms. These independent lawyers have the freedom to set their own billing rates and models and can tailor them in a way that is appropriate for the client and the requirement.
Savvy clients should look beyond the traditional law firm for alternative service options.
3. Sign a retainer letter (even if just an email agreement)
To my surprise, clients, even some institutional clients, still don’t unanimously insist on signing a retainer agreement before engaging a lawyer to provide services. Maybe it’s because Canadians are trained to deal with professionals without agreements – we don’t need them for our doctor or our dentist, so why would we need to enter into an agreement with our lawyer?
Rather than becoming the unwitting victim of a firm’s frustrating billing and invoicing practices, get it in writing. Setting up a simple retainer letter, which can just be in the form of an email exchange, will help avoid surprises down the road. Ideally, retainer letters should include reference to the following:
- identity of the lawyer and the client;
- scope of service;
- obligations of lawyer and client;
- fee arrangement;
- billing format;
- rate changes;
- withdrawal or termination of services; and
- conflicts of interest.
I’m not promoting a race to the bottom when it comes to legal fees. There’s a reason experienced lawyers are expensive. We’ve got a few university degrees under our belts and if we’re practising on our own, we will have spent several years developing our expertise. So, clients are paying for highly trained expertise. In addition to our experience, we work in a legally regulated profession with insurance and licensing fees to pay and, unlike full-time workers, we don’t get paid for every minute at our desks.
This is all factored into the billing rates. The more support staff, office overhead and marketing there is to pay for, the higher the fees – and that’s just simple math.
All that being said, there are ways to structure relationships that make sense for both lawyer and client so that clients walk away with fewer disappointing anecdotes about lawyers and their billing practices. The fewer of those there are, the better it is for all involved.