One of the unique benefits of deferring contingent legal fees (that a lot of attorneys may not know about) is that you can use those deferred contingent legal fees to retain key employees and key staff without giving up equity in your firm.
Plaintiff attorneys who own a majority of the equity of the firm may want to keep younger associates with their company but do not necessarily want to give up equity. You can use contingent legal fee deferrals to your advantage to help keep those key associates through the use of a vesting schedule.
How Would a Vesting Schedule Work in a Law Firm Setting?
If you settled a case and you opted to defer the legal fees for several years, you can make a deal with your key associates wherein they will receive a percentage of the deferred fees after a set number of years that they have remained with the firm. You can tell them that you are going to defer the fees on specific cases for several years. If they are still with the firm after the agreed-upon period of time, they get the agreed-upon percentage of those future fees as they come in.
If they choose to leave before the agreed number of years, then those future payments pay into the firm, and you can use them however you want. On the other hand, if those associates are still with you in those years, then they get their percentage of the fees according to the agreement.
It’s a way to place golden handcuffs on these great young associates that you want to keep without having to give up equity, and it will motivate them to work hard to stay with your firm because they know that there’s significant financial upside due to them in the future if they stay.
Deferred legal fee income allows you to help grow your firm, and attract and keep key employees and associates without giving up equity. If you are interested in using deferred legal fees as golden handcuffs for your key staff members or associates instead of giving up equity, give us a call. We’d love to talk with you about this creative use case for attorney fee deferrals.