When Results Shouldn’t Matter: The Case Against Mediator Contingency Fees
In this article, Mitchell Rose makes a sound case against mediators charging contingency fees, even going so far as to suggest that they could lead to the regulation of the mediation profession. Notwithstanding professional ethics, Mitchell asserts that mediator neutrality is compromised when fees are dependent on a negotiated settlement. Additionally, mediators who work on contingency may increase fees to reflect an increased risk of non or low payment if no settlement is reached, leading to wild fluctuations in mediation rates. Is it time for universal mediation practices and prohibitions?
Recently, the Law Society of Ontario (“LSO”) approved reforms, effective July 1, 2021, as to how the province’s lawyers (myself included) and paralegals may charge contingency fees for legal services.
What is a Contingency Fee?
A contingency fee arrangement is one in which a fee is paid to a professional only if they obtain a certain outcome (hence the lawyer ads stating “if we don’t win, you don’t pay”). Contingency fees are a type of “alternative fee arrangement”—as in an alternative to fees based solely or primarily on time expended. Proponents of contingency fees believe they provide the public with access to justice by transferring the risk of losing to the legal professional and easing client cash flow.
Reading about the upcoming LSO reforms made me think about contingency fees in the context of my other profession: mediator. In the case of a mediator who, instead of being hired by one side to “win” a case, facilitates negotiations between two or more parties in conflict, the result that could give rise to a contingency fee would be helping the parties reach a settlement. In other words, “if you don’t settle, you don’t pay – or you pay less.” That said, mediator contingency fees are uncommon – but not absent – in Canada. I’ve never charged one as a mediator, nor have I been charged one as a lawyer. In my experience, mediators typically charge flat fees for a certain amount of mediation time, hourly rates, or some combination.
ADRIC Prohibition on Mediator Contingency Fees
Mediator members of the ADR Institute of Canada (“ADRIC”), and its regional affiliates, are prohibited from charging contingency fees under ADRIC’s Code of Conduct for Mediators (“the Code”). Section 9.2 of the Code states that a “mediator’s fees shall not be based on the outcome of Mediation, or on whether there was a settlement or (if there was a settlement) on the terms of settlement.”
In other words, results shouldn’t matter when it comes to fees.
While ADRIC is not a regulator like the LSO and other provincial law societies, and mediation is an unregulated profession in Canada, the rate of membership of working mediators in ADRIC is relatively high, but not universal.
ADRIC members should obviously not charge contingency fees, or they risk discipline and possible loss of their C.Med or Q.Med designation, but what about mediators who are not (yet) members? And what are the reasons behind ADRIC’s prohibition on contingency fees (and why should all mediators refrain from charging them)? I suspect the drafters of the Code would have agreed with the following:
Why Results Shouldn’t Matter. 5 Reasons Mediators Should Not Charge Contingency Fees:
- Mediators are supposed to be impartial. However, if a mediator’s fee — or part of it — is dependent on achieving a settlement then impartiality is compromised. Mediators facing a possible reluctance to settle might react by, for example, increasing pressure on a weaker party to flex, or shading the way they present information to the parties to increase pressure to settle. Then parties will lose faith in the mediator and, with it, the mediation process.
- If the mediator is paid regardless of the outcome of the mediation, the parties need not worry about being consciously or unconsciously influenced by the mediator’s fee arrangement when deciding whether to settle their dispute, and on what terms. A ban on contingency fees facilitates people making smart choices for themselves about their disputes. In other words, it promotes self-determination.
- Contingency fees fail to recognize the true value of a mediator’s services. Despite a mediator’s best efforts, a case may not settle at mediation for reasons unrelated to the mediator’s skill and efforts. The mediation also creates an atmosphere for settlement in the future and without the mediator’s intervention. Furthermore, there is still value in a mediation not resulting in settlement, such as a narrowing of issues, a preview of witnesses, a better understanding of the other side, and, where appropriate, an early neutral evaluation.
- Mediator fees aren’t a barrier to justice. While there are busy mediators who may charge $5,000 or more per half-day, this is not the norm. At the same time, it is currently possible in Ontario to hire a mediator for a Mandatory Mediation in a civil or estates dispute for as low as the tariff rate of $600.00 per half-day plus tax (divided between the parties). The majority of mediators I know charge somewhere in between the two extremes. As well, a mediation that ends in settlement often results in a reduction of legal fees, or at least a reduction of other costs, along with time and risk.
- A widespread use of contingency fees by mediators could decrease access to justice since meaningful access to justice should include access to mediation. This is because:
a) Mediators who work on contingency may increase fees to reflect the increased risk of non or low payment if no settlement results. This, in turn, can have an upward effect on all mediators’ fees.
b) Regardless of whether fees rise, fall, or stay flat, the pressure to charge contingency fees due to market forces could force skilled and experienced mediators to leave the mediation profession, or to quit organizations like ADRIC that hold mediators accountable to high practice standards.
c) Mediators who charge contingency fees will likely be more selective about the disputes they take on at the outset, thereby making it harder for many people to hire a mediator.
Of course, the arguments against mediator contingency fees do not imply that mediators cannot be creative in how they charge, or that they can’t provide further value to clients, provided those arrangements don’t compromise the integrity of the mediation process, or have unwanted consequences on the justice system.
Yet if mediator contingency fees become widespread then we can expect increased calls for regulation of the mediation profession. Regardless of where one currently stands on the issue of regulation, it is likely that any future regulator of mediators would prohibit contingency fees for all or some of the reasons set out in this article.
Mitchell Rose is a Chartered Mediator and Settlement Counsel. He advises employers and employees on contractual and severance issues, and he mediates and arbitrates employment law and civil disputes. Mitchell is presently Chair of the Alternative Dispute Resolution Section of the Ontario Bar Association, and a member of the ADR Institute of Canada.