Paying Your Attorney on an Hourly Basis, Part II

A checkbook, keyboard, mouse and the words Paying your attorney: hourly basis
Once a client signs an hourly fee agreement and provides a retainer, the attorney will begin work on the case. Many firms have tier levels for legal fees. For example, a partner may charge $300 per hour, an associate $200 per hour and a paralegal $50 per hour. It is anticipated that a partner is usually a more experienced practitioner, therefore their work costs more per hour.

Attorney fee amounts also vary by geographic location and nature of legal services provided. For example, a rural Nebraska attorney representing an individual in a drunk driving case may charge $125 per hour, whereas a New York City attorney representing an international corporation in a patent dispute might charge $1,200 per hour.

Attorneys bill their time in six minute increments. Six minutes equals one-tenth of one hour. For example, if the attorney speaks with a client on the phone about their case, and the phone call took twelve minutes, the attorney will bill two-tenths of one hour. If the attorney charges a rate of $100 per hour and that phone call was the only action taken on the client’s case that month, the client is billed $20.00 ($100 per hour multiplied by .2 = $20.00).

Attorneys keep track of their time as each month progresses. At the end of the month, the attorney should provide the client a detailed invoice showing every action taken on the client’s behalf (I.e., telephone calls, letters drafted, court appearances, etc.). The attorney should also provide the client a detailed monthly statement showing the retainer amount held in the IOLTA at the beginning of the month, the amount deducted during the month and the amount remaining at the end of the month.

Attorneys deduct from the client’s retainer in order to pay for their services. For example, a client provides their attorney a $10,000 retainer on January 1st to commence legal representation. For the month of January, the attorney does $2,000 work of work on the client’s case. At the end of January, the attorney deducts $2,000 from the client’s retainer to pay for their legal work, leaving $8,000 of the retainer in the IOLTA.

The client’s retainer balance goes down as the attorney continues work. As a result, many attorneys require clients to replenish the retainer to its original amount once it drops to a certain level (usually $1,000 to $5,000). For example, if the initial retainer is $10,000, and the hourly fee agreement requires the client to replenish the retainer when it drops to $2,500, when that happens the client will need to provide $7,500 to restore the retainer to its original level. That money is also deposited into the attorney’s IOLTA and remains the client’s money until such time as the attorney bills against the retainer. Any client retainer money left over in the IOLTA at the conclusion of the representation is returned to the client.

Our next post will talk about how attorneys are paid in workers compensation cases.