To Sue His Or Her Employer In New York, Should An Executive Or A Professional Retain An Employment Lawyer On A Contingent-Fee Basis Or, Instead, On An Hourly Rate Basis?

There is no one-size-fits-all answer to whether, in bringing and prosecuting a lawsuit against his or her present or former employer in New York. An executive or a professional should retain an employment lawyer on a contingent fee basis or, instead, on an hourly rate basis. The answer depends on the specifics of the executive’s or the professional’s case. That said, I submit that there are many circumstances in which, in suing his or her employer in New York. an executive or a professional is best off retaining an employment lawyer on an hourly rate basis rather than on a contingent fee basis.

First, let’s define our terms. An hourly rate basis is what it sounds like: the employment lawyer bills the client by the hour, at a specified rate per hour, for the attorney’s work, excluding non-billable work. (At times in this article, and for brevity’s sake, I refer to such employment lawyers as “hourly rate basis employment attorneys,” “hourly rate employment lawyers,” or the like.)

In general, non-billable work is work of a type that could have been performed by a paralegal or a secretary rather than by an employment attorney, such as photocopying or scanning documents, Bates-stamping documents that are responsive to the employer’s discovery requests, preparing summaries of witnesses’ deposition testimony, taking notes on a conference between the lawyer and the client executive, organizing pleadings or correspondence, or the like.

Non-billable work may also include work by the employment lawyer, of a legal nature, which the attorney, based on his or her level of experience and in the exercise of his or her billing judgment, decides not to charge the client professional for. Legal services which an employment lawyer, in his or her billing judgment, declines to charge his or her client for may include, for example, reviewing templates for a pleading that the lawyer is drafting, reviewing Court rules, looking at legal treatises, taking part in a conference with the executive or the professional in which one or more of the lawyer’s attorney colleagues also are participating, or time expended in excess of the number of hours that, in the lawyer’s experience, is reasonable to expend on the involved task.

In contrast to an hourly rate basis, a contingent-fee basis is an arrangement under which the executive’s or the professional’s employment lawyer receives a specified percentage of the monies, if any, that the lawyer recovers from the employer, on the client executive’s behalf, by means of a settlement or a court judgment. The client professional’s payment of his or her employment attorney is dependent upon, or “contingent” upon, the client winning the lawsuit. A contingent fee is typically 33% to 40% of any monetary recovery.

(Periodically in this article, and for short, I refer to employment lawyers who charge clients a contingent fee as “contingent-fee basis employment lawyers,” “contingent-fee employment attorneys,” or the like.)

In addition to charging the client a contingent fee, a contingent-fee employment lawyer may require the client executive or professional to pay to the lawyer, up front, a certain amount of money – for example, $10,000 – to cover those out-of-pocket expenses that the lawyer incurs in prosecuting the executive’s lawsuit. These out-of-pocket expenses, for which the client executive pays the lawyer upon retaining him or her, may include court fees for commencing a lawsuit, for assigning a judge to the lawsuit, or for making motions or applications; court reporters’ fees for transcribing depositions of witnesses; fees charged by process servers or by detective agencies; and so forth.

In some lawsuits, particularly those with a high risk that the client executive or professional will recover nothing from his or her employer, the contingent fee may be as high as 50% of any monies recovered.

Five of the reasons why, to sue his or her employer in New York, an executive or a professional may be best off retaining an employment lawyer on an hourly rate basis, rather than on a contingent fee basis, are the following. First, the contingent fee that an employment lawyer charges may be much larger than the fees that the executive or professional would have incurred by retaining an employment attorney on an hourly rate basis.

Once you — the executive or professional — agree with your employment lawyer on a contingent fee, you owe, to your attorney, the agreed-upon percentage no matter how long your case may take, whether it takes a year or a week.

For example, suppose you – the executive or professional — retain an employment lawyer not to file and prosecute a lawsuit against your employer in New York, but rather to prepare a draft complaint, to forward that draft complaint to your company along with a short demand letter, and to undertake, before filing a lawsuit, to negotiate, with the employer, a monetary settlement. In these circumstances, it’s highly likely that any contingent fee that you, the client, incur will be substantially higher than the attorney’s fees that you, the client, would have incurred by hiring an employment lawyer on an hourly rate basis.

Similarly, suppose you –the executive or professional — retain a lawyer to file and prosecute a lawsuit, and you and your employer resolve your lawsuit in its early stages. For instance, suppose that you and your employer settle your lawsuit before discovery is completed or before the employer files a dispositive motion. In such a scenario, it’s quite likely that the contingent fee that you, the client, pay to your employment lawyer will exceed the attorney’s fees that you, the client, would have incurred had you retained an employment lawyer on an hourly rate basis.

Second, an employment lawyer whom you – the executive or professional – retain on a contingent fee basis is likely to pressure you to settle for the first monetary offer that your employer makes to you, regardless of whether or not, in light of the value of your claims against your employer, that offer is adequate. By contrast, an hourly rate basis employment attorney’s interest is aligned with your – the executive’s or professional’s — best interest, which is securing the monetary settlement or judgment that is appropriate given the strength and the value of your case.

Let’s take a simple example. Let’s say you, the executive, retain, on a contingent-fee basis, an employment attorney to represent you because your employer in New York owes, to you, unpaid salary, bonuses, commissions, or other compensation. Further suppose that, after your lawyer works on your case for five to ten hours, your employer offers, to you, $10,000.

Given the modest amount of work that your contingent-fee employment lawyer has devoted to your case, your employment lawyer may think – regardless of the amount of compensation that you’ve wrongly been denied — that your employer’s nuisance-value settlement offer to you is more than enough. As a result, contingent-fee employment lawyer may pressure, you, the client, to accept your employer’s lowball offer, even though the salary or other compensation that your employer unlawfully has withheld from you may be much greater.

So as you can see, in New York, employment attorneys who work on a contingent-fee basis have a strong personal incentive to settle your lawsuit quickly and cheaply before the employment attorney expends substantial time and effort on your case. This is what disgruntled clients usually mean when they say that their employment lawyer “sold me out.”

By contrast, an employment lawyer who represents an executive or a professional, on an hourly rate basis, in suing the executive’s or professional’s employer is not incentivized to take the employer’s first offer of settlement, whether or not that offer is adequate. Instead, as stated, the hourly-rate-basis employment attorney’s goal is aligned with the executive’s or professional’s best interest, which is securing the monetary settlement or judgment that is appropriate given the strength and the value of the professional’s case.

Third, an employment lawyer who is suing an executive’s or a professional’s employer in New York on a contingent-fee basis is unlikely to pursue, in court, non-monetary relief, even if that relief is primarily what the executive are looking for. In many employment law cases, what the executive or the professional most wants is a remedy that is injunctive rather than monetary. By contrast, an employment attorney who brings and prosecutes, on an hourly rate basis, an executive’s or a professional’s lawsuit against a client executive’s employer will pursue whatever judicial remedies are most important to the client, be those remedies monetary, injunctive, or both.

Injunctive relief is an order directing the employer to do, or not to do, something.

For example, in many wrongful termination lawsuits, and particularly in cases in which the relationship between the company and the executive or professional is not completely poisoned, what the discharged executive wants most is reinstatement.

That is, often, what the discharged professional most desires is a court order directing that the employer reinstate the professional to the job from which they were unlawfully terminated or to a comparable job.

However, an employment lawyer who, on a contingent-fee basis, represents you, the executive or professional, in a lawsuit against your employer in New York is unlikely to meaningfully pursue in court, on your behalf, any non-monetary relief, such as reinstatement. This is the case because a contingent-fee employment lawyer gets nothing for any non-financial remedy that, via a court judgment, the lawyer may obtain for you, the client.

It’s not possible, for example, for an employment attorney, who is representing an executive or a professional on a contingent-fee basis, to take a percentage of the executive’s or professional’s reinstatement to his position at the defendant employer. Therefore a contingent-fee employment lawyer is likely to seek in court, on the professional’s behalf, only monetary remedies.

In contrast, and as noted above, an employment attorney who brings and prosecutes, on an hourly rate basis, an executive’s or a professional’s lawsuit against a client executive’s employer will pursue whatever judicial remedies are most important to the client, whether those remedies are monetary, injunctive, or both.

Fourth, in New York, most employment lawsuits in which an executive or a professional recovers monies from his or her employer are resolved through a settlement between the parties, rather than by a jury’s verdict or a court’s judgment. When an executive or a professional and his or her present or former employer in New York reach a settlement-in-principle of the professional’s lawsuit against the company, the employer and the executive must reduce that settlement-in-principle to writing. This written resolution of the executive’s lawsuit is called a settlement agreement.

Invariably, it is the employer’s lawyer who prepares, and sends to the executive’s or professional’s employment lawyer for review and comment, a first draft of the settlement agreement. That first draft, by the employer’s counsel, of the litigants’ settlement agreement is heavily, and often outrageously, tilted in the employer’s favor, especially as to the agreement’s non-monetary terms and conditions. Unfortunately for the executive or the professional, however, an employment lawyer who is representing the professional on a contingent-fee basis will likely pay scant attention to any non-monetary terms of the settlement agreement, however unfair (to the professional) those terms may be.

By contrast, an employment lawyer who represents you – the executive or professional — on an hourly rate basis will pay equal and diligent attention to both the monetary and non-monetary terms of any settlement agreement between you and your employer.

To be sure, a crucial term of most settlement agreements is the lump-sum amount of money that the employer must pay to the executive or the professional. That said, the non-monetary conditions of the employer’s and the executive’s settlement agreement can be equally as important, or nearly as important, as the agreement’s monetary terms.

Important non-monetary terms of an executive or professional’s and an employer’s settlement agreement may include, for example, (i) in circumstances where the litigants’ relationship is relatively amicable, a consulting agreement for future work that the executive or professional will perform, as an independent contractor, for the employer and (ii) restrictive covenants.

That is, in written agreements resolving executives’ or professionals’ lawsuits against the company, employers in New York often require, in exchange for any settlement monies that the employer pays to the executive, either (i) that the executive agree not to compete with the company for a certain number of years or months after his or her discharge and/or (ii) that the professional covenant not to solicit customers of the company for a certain number of years or months after his or her termination.

Restrictive covenants can be highly damaging to a terminated executive’s or professional’s future employment prospects. However, a contingent-fee employment attorney, in negotiating the settlement and in revising the settlement agreement on the executive’s behalf, is unlikely to pay much attention to any non-competition or non-solicitation provisions of the agreement or, for that matter, to any other non-monetary terms of the settlement agreement. This is so because an employment lawyer who represents you — the executive or professional – in an employment case against your employer does not receive a percentage of any non-monetary condition of the settlement.

I represent executives, professionals, and employers in labor and employment matters in New York and New Jersey. In employment lawsuits in which I represent the defendant employer, in which the plaintiff employee has retained his or her attorney on a contingent-fee basis, and in which the litigants settle the case, I am often taken aback after I send to the plaintiff employee’s counsel, for review and comment, my employer client’s draft settlement agreement, which is heavily weighted in favor of my client. That is, all the non-monetary terms and conditions of my employer client’s proposed settlement agreement favor my employer client, yet the executive’s or the professional’s contingent-fee attorney makes no effort to negotiate any of these onerous (to the executive) non-monetary terms.

In contrast, and as stated, an employment lawyer who represents you – the executive or professional — on an hourly rate basis will pay equal and diligent attention to both the monetary and non-monetary terms of any settlement agreement between you and your employer.

Fifth, an employment lawyer who sues an executive’s or a professional’s employer in New York on a contingent-fee basis will likely give less individual attention to the client executive’s case than an employment lawyer who prosecutes the executive’s lawsuit, against the employer, on an hourly rate.

To understand why this is the case, one must consider the nature of a contingent-fee employment lawyer’s practice.

Lawsuits against employers that are brought on a contingent-fee basis are all about spreading the risk. To succeed as an employment attorney who bills executives and professionals on a contingent-fee basis, the employment attorney must take on a large number of clients’ cases. The contingent-fee employment lawyer knows that some of his or her clients’ cases will pan out and that others will not. That is, some of the clients’ lawsuits will result in a monetary recovery for the client, and others will fail.

So contingent-fee employment lawyers take on a large number of clients’ cases to spread the risk of losing the non-meritorious cases.

Moreover, because a contingent-fee employment lawyer is obliged to accept such a large volume of clients to ensure that, at all times, the lawyer will have some cash flow, they are likely to give less individual attention to each case.

By contrast, each and every month, an employment lawyer who charges his or her client executives and professionals on an hourly-rate basis generates and mails invoices to his clients and collects fees. That is, an employment lawyer who works on an hourly-rate basis always has a cash flow. Because an employment lawyer who bills at an hourly rate always has a stream of income, hourly-rate employment lawyers can afford to accept a smaller number of clients’ cases and to give, to each client’s lawsuit, more careful and individual attention.

These are some of the reasons I submit that, as an executive or professional in New York, you may be best off retaining an employment attorney to sue your employer on an hourly rate basis, rather than on a contingent-fee basis. Again, however, in your employment lawsuit, the answer to what billing arrangement is best for you, the client, varies. Further, the optimal billing arrangement for you, the client, depends on all the circumstances.

I wish you the best in your search for a competent and diligent employment lawyer to champion your cause.

If you are an executive or a professional in the borough of New York metropolitan area and you believe you have been wrongfully terminated, that you’ve been denied salary, bonuses, commissions, or other wages that are owed to you, or that your employer has failed or refused to reasonably accommodate your disability, call New York Employment Lawyer David S. Rich at (347) 418-0672 today. Likewise, if you are an executive or a professional in the borough of New York metro area and your employer is internally investigating you for unlawful sexual harassment, other unlawful workplace harassment, or other misconduct, call New York Employment Attorney David S. Rich at (347) 418-0672 today.