Paying Your Attorney on an Hourly Basis: Part 1

A checkbook, keyboard, mouse and the words Paying your attorney: hourly basis

As we saw from the previous post, contingent fee agreements are one way for a client to pay their attorney with a portion of the money they receive at the end of representation. However, some cases will not result in a monetary award to the client, requiring an alternative method of payment through an hourly fee agreement.

Under such an agreement, a client pays an attorney per hour for their services. Important: In criminal and divorce cases, an attorney is ethically prohibited from representing a client on a contingency basis and must charge hourly for their work.

Many times the attorney will offer a free initial consultation to determine whether they can assist the individual or business seeking representation. Assuming an agreement for representation on an hourly basis is reached, the attorney will prepare and provide a written hourly fee agreement to the client. The agreement should clearly and completely outline what the attorney is hired to do, retainer terms and the attorney’s hourly fee. It is important that the client read and fully-understand the hourly fee agreement before agreeing to its terms and signing it.

An attorney will likely require a retainer at the beginningof representation. A retainer is a set amount of money provided by the client to the attorney. A retainer can be any amount, but a typical retainer is anywhere from $2,500 to $15,000, depending upon the scope and complexity of the representation. Attorneys require retainers as a guarantee that there is money available to pay for their legal services.

The attorney deposits the client’s retainer money into an Interest on Lawyer Trust Account (“IOLTA”) with a bank. While the money may be in the attorney’s IOLTA, it remains the client’s money until such time as the attorney beings work and bills against the retainer. When this occurs the attorney will take money out of the IOLTA as billed (usually a monthly basis) to pay for their work.

Many clients want to know what happens to the interest on their money being held in the IOLTA account. In Massachusetts, all interest is collected by the Commonwealth and used to provide legal services to low income individuals and families. Neither the client, nor the attorney, is allowed to keep any interest generated from funds held in the IOLTA.

Next: how attorneys bill their time against the client’s retainer.