An Introduction to Workers Compensation Legal Fees
The concept of legal fees in a workers’ compensation setting is straightforward. Just like any other type of attorney fee, a fee is charged to you for your legal assistance. Unlike other types of personal injury cases, the workers’ compensation laws of New Jersey require you to pay your lawyer from the beginning of your case. This is partly due to the fact that workers’ compensation lawyers are required to handle your case without charging a retainer.
A retainer is a lump sum payment in an advance against which all future fees are billed. Lawyers typically charge and bill by the hour. This means that your lawyer will keep a log of when and what they do on your case . At the end of the month, they will adjust the retainer downwards to reflect all of their work on your case. Once the retainer is reduced to zero, you must then add another payment to the retainer in order for your lawyer to continue working on your case. Subsequently, you must charge all payments for legal services out of your case recovery.
Workers’ compensation lawyers will typically apply for legal fees from the Judge at the end of the case. Legal fees are "approved" by the Judge and are then deducted from your recovery, whether it was from a settlement or an award fully adjudicated by the Judge.
Factors That Affect Legal Fees
Several factors can influence the amount of legal fees associated with a workers compensation case. An important factor is the complexity of the case itself. More complex and protracted cases often involve more legal work and will require more time from an attorney. As a result, they can often end up costing more to litigate as compared to more straightforward matters. While it is hard to predict how much time a case will take, attorneys can usually provide you with a general estimate upon review of your situation.
The experience level of the attorney is also an important factor when it comes to legal fees. While not every attorney has to take the same legal fee, most are generally able to litigate a case and settle a case for approximately the same amount. It is in your best interest not to solely select an attorney because they claim to charge less than other attorneys. If a lawyer is an expert in workers compensation law, they may be able to settle or win your case for an amount that is equal, or better than what a low-cost attorney would be able to achieve.
Geographic location can also affect legal fees. As with many industries, the cost of services vary from state to state and city to city. For instance, common costs of services in a rural area may be very affordable, but have the same legal service priced at a substantially higher rate in a big city. Of course you cannot change the geographic location of you and your attorney, or the insurance company, but you do want to keep this in mind if your claim is transferred to another part of the state. An attorney should be up front if fees are likely to be higher because your claim has been transferred to a more populated area.
Different Types of Legal Fees and Payment Plans
There are three main types of legal fee and payment structures used by workers compensation lawyers: contingency fees, hourly rates, and flat fees. In the workers compensation realm we see the most use of contingency fees and hourly fees. Hourly fees are most common in the non-insurance personal injury world. A flat fee is a rare occurrence in any area of law. That said, let’s look at each of these three types of fees:
Contingency Fees: A contingency fee means that the attorney does not get paid anything unless they win your case. The standard contingency fee in Illinois for workers compensation is 20%. This means that if your lawyer wins your case, they get 20% of your settlement; IF THEY DON’T WIN YOUR CASE, THEY GET NOTHING. Contingency fees sound great in theory but be careful. It is still important to consult with a number of attorneys to see what they’d charge you, since some charge much higher than the 20% the law allows. And there’s even more to look out for – some attorneys ask for an additional 5% for trial, others have hidden fees built in. Still others have unwritten fee agreements. These all stink. If I go to McDonalds and order a burger and they hand me the receipt at the end of the meal and say "Oh by the way, there was a $5 burger tax" I’d walk out. Bottom line? Ask potential lawyers who you are going to hire if their fee agreement is in writing. Any lawyer who can’t explain fees to you in a forthright manner does not deserve to represent you.
Hourly Fees and Flat Fees: Once upon a time contingency fees were illegal in Illinois. Attorneys were not allowed to have a stake in the outcome of a case. But in 1985 the Illinois Supreme Court said that we could have a stake in the outcome of a work comp case as long as it is allowed by statute (which it is) and that the fee agreement is in writing (the law requires that). The fee must include the total percentage that the lawyer gets, the percentage of medical expenses, and the percentage of disbursements such as medical records, expert fees, etc. In an hourly fee case the lawyer charges you their hourly rate and bills you for their time. The downside of allowing someone to bill you hourly is that your lawyer will be incentivized to do more work than if you were on contingency. If they do more work you’ll have a lower fee, but they need to decide if it’s worth doing more work for a lower fee. So they should be incentivized to do less work, but they won’t be if you are paying them hourly. Flat fees are rare in workers compensation, but still, you might see them. A flat fee is payment for a specific piece of work and no more. It’s not contingent on the outcome and it is not a retainer. It’s just a flat fee for one piece of work. Typically this is when someone wants to do work for a case on their own and then finds that they need an attorney for one specific thing (like to appear in front of the arbitrator). I don’t recommend hiring a lawyer on a flat fee because they just don’t do it and when they do it’s usually not in your best interests.
How Legal Fees Are Calculated in the Workers Comp System
The issue of legal fees is essential to workers’ comp cases because if a case settles for $10,000 and the lawyer takes 20% plus costs, you are getting $8,000. However, if your case settles for $100,000, and they take the same percentage, you will get $80,000. If you settle for a penny under $22,500, you get nothing because you agreed, years ago, to pay the lawyer a minimum of $4,500. This calculation does not include costs, which are also taken from you.
So what do the lawyers charge? All Illinois attorneys, including workers’ compensation attorneys work on a contingency fee basis, which means that we don’t get paid unless you win. The workers’ compensation fee is 20%. Whether you get 80% of your settlement or $80,90, or 96, this is called a "fair fee" in Illinois. The only type of attorney that can charge more than your workers’ compensation attorney is a Medical Malpractice attorney. Medical Malpractice attorneys can charge you up to 40%, but again they are hard to find. No other attorney can charge you more than 20% on a contingency fee.
There are no magic math formulas that the judge needs to review, although they can if it is requested. Generally, there are two questions: Is the work fair and is the amount reasonable? This means if you went to court ten times and it took three years, that is fair. If your attorney put in $9,000 in costs, that is fair and reasonable. A hearing can be held to show the judge or arbitrator why the fee is fair/never used.
If you have heard horror stories about a workers’ compensation attorney or you feel like your attorney is trying to take advantage of you, ask your lawyer to explain how the attorney fees are calculated on your case, and repeat the above math. It sounds like a lot of money, but in the long run, it can be less than what the attorneys you are hearing bad stories about are getting.
State-Specific Regulations Regarding Workers Compensation Legal Fees
Each jurisdiction has its own rules and regulations regarding the amount of fees to be paid to lawyers in workers compensation cases. In most every state, there is a fee schedule which limits the amount of the attorney’s fees in workers compensation cases. In most cases, in order for a lawyer to get paid attorney’s fees, they have to present a verified application to a judge and the judge has to approve the amount. If you are a lawyer and are smart, before you ever file the first hearing in a case, you should advise your client of your fees and get their written consent to be bound by the fee schedule. If you are a lawyer and are stupid, you don’t ever tell your client and end up with an issue later.
Each state has their own rules and if you mess up, you may not only damage your reputation and lose future cases, but you could also get immediately sanctioned. I was doing a seminar in Philadelphia a few years ago and heard a horror story in this regard. One of the lawyers told it. He got a case on referral, did the work, settled the case, and then at a later date went to get his fees. The problem was that the lawyer who handled the case had never conducted any sort of evaluation on the amount of fees he was going to be entitled to, nor did he inform the claimant of what would happen. When it came time to file his application for fees, the Commission denied the motion because the rating had lapsed. He argued that the other lawyer did the work so he should get paid, but the Commission told him that under the statute, he had to get the fee approval plus he had to tell the claimant that the amount of his fees would be limited. In short, he lost the fees.
Discussing Your Fees with a Workers Compensation Attorney
It’s always best to have everything on the table and in writing. The way that you will do that is ask for a retainer agreement. That sounds fancy, but it’s a written agreement between you and the attorney about what they are going to do for you and how much you are going to pay them.
If the case is under $25,000, you are looking at a fee of around 20%, if the case is between $25,000 to $75,000, you are looking at around 15% of the fee plus costs and if the case is over $75,000, we are typically looking around 10% of the fee.
A lot of the stuff is up to negotiation. In addition, most cases have something called "good faith" in them. That means that you have to pay them in order to get a fee. We always recommend that the fee be contingent upon the successful result.
Basically, if you get benefits, you pay a percentage; if you don’t , you pay nothing. A lot of lawyers will include in their retainer agreements something called a "non-contingent fee". Here’s how that works: you don’t pay me, but if I sent a letter and they didn’t respond or gave us the wrong information, they owe my firm or my staff or my time.
You should ask your attorney how they charge for that time, if they charge at all; and if they do, you may not want to proceed with that attorney because if someone is sending letters and visiting the client’s house for hours about the details of the case, it seems like they are admitting that they are going to take the time out.
If it’s a large firm, you might have to discuss it with whoever your attorney is going to be, but you should mention that you want to know about the authority for charging the fee and you just want me to get that in writing because there can be no question later on.
How Legal Fees Impact Workers Compensation Settlements
Final legal fees are typically computed by taking a percentage of the outcome (settlement or award) and Federal law allows a maximum of 20% of the total amount recovered for the claimant. Where extensive litigation has occurred there are provisions under the law to request more than 20% (up to 25%).
It is important to know that legal fees in workers compensation cases are determined at the end of the case/claim. Generally, as a claimant (injured employee), you do not pay any legal fees up front when you hire an attorney. The attorney will receive their fee from the workers compensation insurer (employer). That fee is automatically deducted from the claimant’s recovery when distribution of the award is made.
For example, if the claim settles for $10,000, the attorney’s fee will be $2,000 (20%) and you would receive the remaining $8,000.
It is also important to know that attorney’s fees are not paid out of the injured employee’s own funds. Rather, payment is made from the proceeds of the overall award. The injured employee does not have to pay the attorney or the workers compensation insurance company out of their own pockets.
There are other ways to get attorneys fees. For example, if your claim goes to hearing and the Judge determines that the insurance company wrongfully denied your claim and makes an award to you irrespective of whether you had representation by an attorney or not, the Workers Compensation Act allows the Judge to award the claimant their attorney the same amount the claim is awarded.
Workers Compensation Legal Fees: FAQ
How does the payment arrangement work for workers compensation legal fees?
The attorney’s fees in a workers’ compensation claim are due to the attorney upon the receipt of a substantial workers’ compensation settlement or award from the New Jersey Division of Workers Compensation, if any. The attorney’s fees shall not be more than 20 percent of the recovery on the first $10,000 of recovery and 15 percent on the next $30,000 of recovery. Attorney’s fees in excess of these amounts are subject to Court review.
How much will it cost me to have an attorney represent me in my workers compensation case?
There is no fee for an attorney to review your case and advise you on a free initial consultation. Normally, there are many benefits that can be obtained for you following an injury without the need to retain an attorney. However, when you do require representation, under New Jersey law, the attorney’s fees are capped at 20 percent of the settlement or court award amount that they help you obtain. This fee is paid when your case is settled and is deducted from your settlement. Thus, hiring an attorney is essentially free, because your settlement will be large enough to cover the attorney’s fees, and your expenses. You will never be asked for any money out-of-pocket at any time.
Why do I need to pay a retainer for my workers compensation claim?
In most cases you do not pay the attorney’s fees for a workers compensation claim until your case has been closed. In most workers compensation claims involving permanent disability you do not pay the attorney’s fees until the case is closed. In rare cases you may be required to pay a retainer.
Conclusion: Workers Compensation Legal Fees
In conclusion, understanding workers compensation legal fees is an important aspect of ensuring you receive fair compensation for your injuries. By familiarizing yourself with the different types of fee structures, such as hourly fees, contingency fees, and retainer fees, you can choose the right payment method for your case. When seeking legal representation, it is essential to look for reputable, knowledgeable , and experienced professionals. Don’t be afraid to ask questions and request clarification on any legal fees charged. Transparency and openness are vital in understanding the true cost of legal representation. Working with workers compensation lawyers who charge on a contingency is recommended. This means that your lawyer will not get paid unless you receive financial compensation for your injuries. Choosing this type of lawyer is advantageous because it reduces upfront costs and encourages lawyers to work diligently on your case. By following these guidelines, you can avoid being overcharged, but more importantly, you’ll have a legitimate chance of maximizing your recovery.