Anatomy of Referral Fees
Many lawyers and paralegals who do not practice in the area of plaintiff personal injury law are often surprised to hear that the Law Society of Ontario allows them to receive a referral fee when they send an injured person to an experienced personal injury lawyer. “You mean I can potentially receive a maximum of $25,000 from referring a file to a trusted, experienced lawyer?” they ask. “Absolutely!” I reply.
Most lawyers who know individuals with legal problems outside their areas of expertise appreciate making a referral to trusted, experienced lawyers who do great work. When a referral is made, all parties benefit, especially the injured client who is in good hands.
However, a referral fee is not paid based on a napkin agreement. The Law Society of Ontario requires the lawyer or paralegal making the referral, the lawyer or paralegal receiving the referral, and the client, to all sign a referral agreement.
Where a typical personal injury matter is proceeding on a contingency fee basis, referral fees are calculated as a percentage of the legal fees payable according to the contingency fee agreement or as approved by a court. The maximum referral fee allowed is comprised of 15% of the legal fee paid for the first $50,000 of legal fees, plus 5% of any additional legal fees recovered, up to a maximum referral fee of $25,000.
This referral fee is paid to the lawyer or paralegal who made the referral only after the receiving lawyer or paralegal settles the file and receives payment for their legal fees. However, a paralegal or lawyer who refers a file to another lawyer is prevented from accepting a referral fee if he or she:
- has a conflict of interest ad is not permitted to act on the matter;
- was suspended and was not permitted to act on the matter; or
- is providing legal services through a civil society organization such as a charity or not-for-profit organization.
What better way to ensure an injured person has access to trusted and experienced lawyers than by referring that injured person to a competent personal injury lawyer?