Attorney Fee Structures

Your company’s lawyers, like all employees, will do their job based on how you pay them. Attorneys usually get paid by one of two methods:

• They are paid by the hour.

• They receive contingency fees, which are a percentage of any amount that you win at trial.

If attorneys are paid by the hour, then they have an incentive to work too much, because the more they work, the more you pay. When you pay by the hour, your attorneys have the incentive to spend time considering every single legal subissue. This means, however, that you should be most afraid of suing a company whose lawyers are paid by the hour.

Attorneys paid by contingency fees have an incentive to work too little. Success for a contingency fee lawyer comes from putting a small amount of time into many cases to get as many contingency fees as possible.

Neither paying attorneys by the hour nor paying with contingency fees provides for ideal incentives. When picking a fee structure, however, you must decide which would do you the least harm. Perhaps you want to win at all costs, so you would want to pay by the hour. Or, say, you fear attorneys padding their bill; then you should go with contingency fees.