Lawyers’ rates have risen marginally, but total bill often lower due to COVID-19 efficiencies
It’s been a strange year, to say the least, in the legal world.
Virtually all in-court proceedings have become virtual — as in remote teleconferencing or videoconferencing — with courts closed or limiting in-court appearances. Documents are now submitted electronically, so binding and printing duties have become almost non-existent. And travelling to and from the courthouse or flying in expert witnesses has become a thing of the past.
Canadian Lawyer’s 2021 Legal Fees Survey comes out when we are almost at the end of the tragedy of the COVID-19 pandemic — thanks to vaccines now deployed throughout the country. But we are not quite there yet, and lawyers still do not know precisely how the future will look and what impact the pandemic will ultimately have on legal fees and the costs of running a business.
Editor’s Note: Canadian Lawyer is publishing a benchmarking report specifically designed for firms up to 25 lawyers. This will include a detailed breakdown of legal fees in each practice area covered in the survey, together with insight into firm profitability. If you would like more information or to purchase a copy of the report, please contact [email protected].
This year’s survey shows a continuation of the trend of years of slight fee increases, year over year. The percentage of firms that say they had already raised or would raise their fees stayed the same, at 53 per cent. A slightly smaller rate, 43.7 versus 45 per cent in last year’s survey, said they’d keep fees the same.
However, there is one key difference in this year’s survey — more than three per cent of respondents had lowered or will lower fees. That compares with 1.2 per cent with last year and zero in the 2019 survey.
“Our notional hourly rations have increased marginally,” says personal injury lawyer Ray Wagner of Wagners Injury Law Firm in Halifax. On the contingency side of his practice, a big part of his business, Wagner says those fees will stay the same. “We have no intention to lower or to raise rates,” he says, “despite personal injury law being a very competitive market these days.” (As a side note, Wagner points to how competitive the market is for cases such as car crashes because there are fewer of them thanks to travel restrictions.)
While clients are, in general, becoming more sophisticated and understand how lawyers’ fees work, there are also a lot of clients who never thought they would have to see a lawyer at this point in their lives. So, they need more guidance through the fee process.
“For many of my clients, it’s their first time meeting with a lawyer,” says Jennifer Gold, who practises family law, as well as wills and estates law, in the Greater Toronto Area. “Every meeting with a client, there is an education portion about what is involved in retaining a lawyer and how our fees work. It is very clearly laid out in our retainer agreement in easy-to-understand language.”
Gold notes that many of her clients come in with legal aid certificates, and others generally don’t have high incomes.
As well, a lot of people who might have thought about going the “do-it-yourself” route now realize they might need a lawyer to maneuver a much-changed court system.
“There are a multitude of practice directions from various courts as to how to file documents, how to get a hearing scheduled,” says Ron Shulman, a family lawyer in Toronto, regarding all the COVID restrictions. “This obviously makes it very difficult for anyone who’s unrepresented to navigate through these ever-changing rules.
“Understandably, the courts are adjusting to how to work remotely and keeping everyone safe. But it does create complexity overall.”
In some areas such as family law, hourly billing is generally the best way to go, say Gold and Shulman. Part of the reason for using the hourly billing model is that it is difficult to determine at the outset what will be needed to see a divorce or custody case through to a resolution.
“And even if my client is very reasonable,” says Shulman, “it’s tough to discern what the other side will do and how much work will go along with that.”
Gold says that while she is willing to discuss a fixed fee for something such as a divorce, she always adds the caveat that she may need to revisit fees if it looks like the workload will increase.
Both lawyers say they understand — especially these days — the need for a process for reviewing a bill and adjusting it or figuring out a payment plan.
Shulman says that, under his “modified” hourly rate model, the firm often offers a courtesy discount. “We document time spent, but in the end, it’s reviewed and balanced with what has been achieved.”
Gold says she has looked at options such as reducing hourly rates or coming up with a payment play, especially with those she knows are not making a lot of money yet have been battered by the pandemic. COVID-19, with its lockdowns, layoffs, school closures and people working from home in tight spaces, is bringing some relationship and family issues to a crisis point that ends up in court, says Gold.
“I’m not saying COVID-19 caused these breakdowns, but, certainly, it has pushed forward stressors that were already there.”
Mia Hempey, chief executive officer of Nelligan Law in Ottawa, says that fixed fees have their place in a law firm’s pricing model. The firm is now conducting surveys on offering that option in some areas such as employment and labour law.
“It seems to me that clients might prefer to have a fixed fee, so they know at the start what the cost is going to be, so we’re exploring that now.” With labour and employment issues such as a contract review or a severance package review, a fixed fee might be a good option. “These have quicker review times and [don’t] go off on many tangents, like litigation, personal injury or family law can.”
Almost 59.6 per cent said they offered fee packages or bundles in the survey, while 58.08 per cent offered blended hourly rates. While last year’s survey indicated that 17.3 per cent of the firms provided a contingency fees option, that figure rose to 20.71 per cent this year.
Wagner says an hourly fee in the personal injury space makes no sense. He would even expand that structure to other areas of law “almost universally for a number of reasons, including access to justice.” The billable hour structure can prolong trials with unnecessary motions and requests for disclosure and discovery.
“And if you’re talking about personal injury, most people who are injured have been displaced from the normal economic balance that they have between income and expenses, so asking them to assume a whole new collection of expenses is exceedingly difficult for them.”
One area where clients will likely see a lower number, thanks to the pandemic, is in disbursements and costs for things such as lawyers’ time in court. “COVID is impacting the final bill that the clients receive because certain expenses once charged no longer apply,” says Hempey.
Costs such as renting a room for mediation or discoveries, printing, parking, travel and flying in experts no longer apply as much as they used to, thanks to technology that allows for electronic filing and videoconferencing, for example.
Hempey also notes that hourly lawyer bills can be lower because lawyers don’t have to wait hours, and charge for it, to deal with a case in court. “We’ve been slow to adopt technology, but we’re finally leveraging it to become more efficient,” she says.
Wagner says lower disbursement costs not only help the client but the lawyer, too. “Say you take a $100,000 settlement pre-COVID, with $20,000 in disbursements. The contingency fee comes out of that $80,000 left after disbursements. But if you take that same $100,000, with lower disbursements of $10,000 because of COVID, the contingency fee comes off the $90,000. So, the lawyer and the client both win.”