Most larger employers and employers in certain industries tend to incur multiple workers’ compensation claims in a given year. Those employers who are self-insured or have high self-insured retention clauses face ever-increasing out-of-pocket legal expenses to defend those claims. In an effort to lower overall claims expenses, employers with greater numbers of workers’ compensation claims are seeking alternative billing arrangements with workers’ compensation defense law firms. Foris Law Offices is one of the few Illinois law firms offering flat fee workers’ compensation defense to clients with a large number of workers’ compensation claims, but is a flat fee arrangement appropriate for your business? Here are some of the pros and cons of flat fee arrangements that you should consider before deciding:
Pros of Flat Fee Arrangements
- EFFICIENCY: Traditional hourly-rate fee arrangements create an incentive for attorneys to work slowly. Flat fees create an incentive for attorneys to deliver results as efficiently as possible.
- FEWER OVERALL CLIENT COSTS: By encouraging efficient handling of cases, flat fees help reduce client costs for expenses such as IMEs, expert witnesses, depositions, transcripts and repetitive record requests by forcing the attorney to consider the efficacy and efficiency of such costs before incurring them. In workers’ compensation matters, some clients may realize savings with Third-Party Administrators who may base a portion of their fees on the number of open claims. Flat fees also may reduce your average hourly fee significantly depending on the fee and the number of hours the attorney is required to work to provide the expected service.
- GREATER LEGAL EXPENSE PREDICTABILITY: Knowing up front what annual legal fees will be allows clients to budget for legal expenses and avoids risks of unanticipated large legal bills. Typically, flat fee arrangements for transactional matters are billed as a lump sum for the entire task. Litigation flat fee arrangements are more likely billed in stages. Workers’ compensation defense claims tend to have 3 stages: pre-trial (annual), trial (lump sum) and appeal (lump sum). Billing in stages for litigation matters tends to be more beneficial for the client. If the case is won or settled early on, the client gets predictability and incurs a much smaller fixed legal fee than would have been the case if the fee had been a lump sum based on the entire litigation.
- FEWER FEE DISPUTES: Clients pay one price and are not billed by the hour so there really isn’t a lot of room for disputes. Likewise, clients are freed from the burden of reviewing complex attorney bills.
- IMPROVED CLIENT/ATTORNEY COMMUNICATION: Clients may communicate with their attorney more often without watching the clock. This is particularly beneficial if the client wishes to engage in more strategic, risk-based approaches to claims or simply desires more claims reviews with legal counsel.
Cons of Flat Fee Arrangements
- QUALITY MAY SUFFER IN FAVOR OF EFFICIENCY: Flat Fee Arrangements create an incentive is for law firms to work efficiently, but the concern is always whether quality can and will be maintained when a law firm is pushed to be more efficient. However, most firms would not want to risk losing a client or their reputation by performing shoddy work. To help ensure you are getting quality and efficiency, you should look to firms who have extensive experience in the particular area you are seeking representation.
- YOUR AVERAGE HOURLY FEE MIGHT BE HIGHER: Speed in resolution may come with efficiency. But, if the law firm is able to resolve the matter more quickly than originally anticipated, your average hourly fee or even your total bill may be higher than if you had negotiated an hourly rate. The upside is that you are more likely to save money on litigation costs if the matter is resolved more quickly.
- YOU WILL NOT RECEIVE A DETAILED BILL: Many may argue that not having to review complex attorney bills is a good thing. However, without a detailed bill you also lose the ability to analyze exactly what tasks your attorney performed in a particular matter and how much time was spent on each task. That said, attorneys generally keep time logs even for matters handled under a Flat Fee Arrangement, which should be available by request.
- IT IS ONLY APPROPRIATE FOR CERTAIN TYPES OF MATTERS: In order to ensure the highest quality service performed in the most efficient manner, Flat Fee Arrangements should be limited to situations where the law firm and client will be working together on many similar matters and have an understanding of the necessary work and overall cost. Flat Fee Arrangements are not appropriate for highly complex work and there is usually a provision to allow the renegotiation of fees should an unexpected issue crop up. Typically, the arrangement will contain detailed parameters and assumptions so the client will know what may trigger any fee renegotiation or expense increase. Most Flat Fee Arrangements are made in transactional matters, but a law firm highly experienced in a particular type of litigation, such as Workers’ Compensation, may offer a Flat Fee Arrangement for such matters.
If you are searching for long-term solutions to reach your workers’ compensation and risk management goals, consider a flat-fee arrangement with your defense firm.
Foris Law Offices offers highly experienced and effective Workers’ Compensation Defense and Risk Management services at hourly-fee, flat-fee and alternative fee schedules. Contact Foris Law Offices at firstname.lastname@example.org or 708-848-8700 to learn more about how to reduce your Workers’ Compensation overall costs.