Marketing Incentive Bonus Plan

How to increase your pay by bringing in new clients.

This bonus plan pertains to salaried associates and junior partners only. Non-salaried attorneys are paid on a separate structure, as are “equity partners” (defined as shareholders owning more than 5% of the Firm’s issued shares), which does not include this bonus program, but does include other financial incentives and rewards.

In addition to an attorney’s base salary, there are three kinds of bonuses paid by the Firm:

  1. Marketing Bonus: This bonus is paid on the basis of client generation, subject to this Policy.
  2. Production Bonus: This bonus is paid on the basis of hourly billing, and is covered by definitions, requirements and caveats covered in this Policy.
  3. Discretionary Bonus: Sometimes referred to as the “arbitrary and capricious” bonus, this type of bonus is paid when Firm management deems it desirable to do so; no standards are applied and no quantum of fairness is promised. This bonus is totally subjective.

This policy memo sets forth the terms of the Firm’s Marketing Incentive Program. The purpose of the Marketing Incentive Program is to provide attorneys with an incentive in the form of supplemental compensation for bringing in new business to the firm.  This plan applies to the acquisition of new clients, as well as to the generation of new business associated with previous or existing clients under certain circumstances, according to the terms and percentages set forth herein.  

Definitions

The following terms and words, as used in this Policy, are defined expressly as follows:

  • Actively recruited,” “active recruiting,” and “active marketing” all refer to specific and targeted marketing efforts by an originating attorney. This definition conveys the requirement that in order to qualify for the bonus described in this Policy, the attorney must have done more than merely taking a call from a new client or having received a referral from an existing Firm client. The purpose of the Marketing Incentive Program is to incentivize actual and effective marketing efforts which produce new business as a result of those efforts. The key element of this definitional requirement is that there must exist a demonstrable causal link between specific marketing activity on the part of an attorney and the resulting acquisition of new business by the Firm. (See definition of “new clients” below for further detail.)
  • Collection expenses” include any unreimbursed costs the firm incurs to collect from the client what is owed to the firm.  
  • Fee income received” means the amount of money the client actually has paid to the firm for hourly or contingency work billed by the Firm, net of collection expenses and unreimbursed costs expended by the Firm. Fee income received does not include accounts receivable, writes-offs, unpaid or uncollectible amounts, credits, or payments made for costs, expenses, interest, fees or portions of fees shared with or paid to outside firms or co-counsel.
  • First degree referrals” are new client referrals made to the Firm by entities that have been actively marketed to become new clients, or by others from whom business referrals have been made as a demonstrable result of specific marketing activity by the attorney claiming a bonus under this Policy. The term includes business generated as a result of a relationship of substance (defined below).
  • New business” refers to work for by new clients.
  • New clients” are defined as  clients who have been actively recruited into the Firm (rather than clients who found us on the Internet, general referrals, or due to Firm advertising and Firm general marketing) who have never been clients of the Firm previously, to whom no firm marketing activity has been directed prior to the specific marketing activities initiated by the originating attorney, and that were not referred by a client, referral source, or close personal contact of any other attorney in the firm. This category is intended to encompass those clients who would not have become associated with the Firm but for the specific, meaningful, successful marketing efforts of the Originating Attorney.
  • Non-salaried attorney” means an attorney who is not paid a base salary and is compensated solely on the basis of income generated for the Firm by that attorney through legal work and client generation, each of which is compensated separately for percentages stated herein or otherwise agreed in writing by the Firm.
  • Originating attorney” is the attorney who generates work from a new client, also known as the or “Originator.”
  • Relationship of Substance” means an established relationship between a referral source and an Originating Attorney meeting the following criteria:  It is a personal friendship or a professional contact with history that fairly leads to the conclusion that the relationship was what actually produced the referral.  Examples would be close personal friends, established and historically active referral relationships with other lawyers which have produced a known stream of business, and prior clients.  In the case of organizations such as law firms or medical practices, provisions of this Policy premised upon the existence of a Relationship of Substance are extended to all referrals made by any employee of an organization with which an attorney has formed a Relationship of Substance if that organization had in place a rule or directive to refer matters to this Firm. An example of this extension would include a corporation that is part of a group of affiliated entities or related entities that have retained the Firm, such as when company A, with whom a Relationship of Substance has been formed, has subsidiary B and parent company C who also retain the Firm or an attorney because of Company A’s pre-existing Relationship of Substance.
  • Salaried attorney” means an attorney who is paid a base salary.
  • Second degree referrals” include and are limited to new clients who are associated with or were referred by current clients of the firm or previously established but long dormant referral sources (meaning that they have ceased referring business for not less than three years), sources who have formally announced their intention not to continue to refer business to the Firm for any reason, or previous clients of the firm who have ceased retaining the Firm under circumstances indicating that the relationship has ended yet resumed retention of the firm solely and specifically as a result of active marketing on the part of the Originating Attorney).

Terms of Plan

The Originating Attorney will receive a percentage of all the “fee income received” by the firm from new clients (after deduction of any “collection expenses”) in addition to their base salary if they are salaried, or as part of their income if they are non-salaried, subject to the differing formulas for each as set forth below.

The bonuses paid under this Policy will be paid to an attorney for as long as the attorney is employed by the Firm. No bonus payments shall be paid under this Policy for fees that are paid after termination of employment.

The percentages to be paid under this Policy are unaffected by the question of who performs the work on matters for new clients.

Note: All new business and new clients must be approved by the Firm. For more on this point, see the Policy entitled New Case Approval & Retainers.

Percentages for Salaried Attorneys:

First Degree Referrals and New Clients = 10%.  

Attorneys who generate new business from first degree referrals and new clients shall receive 10% of the fee income received from those business sources for as long as they are employed in the firm.

“Second Degree Referrals”/Related Clients = 5%.

Attorneys who generate new business from second degree referrals and related clients shall receive 5% of the fee income received from those business sources for as long as said attorneys are employed in the firm. These business sources include all new clients who are associated with or were referred by current clients of the Firm if they retained the Firm due to the active marketing efforts of the originating attorney, and previously established clients and referral sources who have clearly terminated their relationships with the Firm but returned to the status of being viable business or referral sources because of the specific and meaningful efforts of the originating attorney.

Specific Exclusions

The following are NOT new clients or related clients:

  • A new case from an existing client. For example, Lawyer A was the originating attorney for Client.  If Client A sends a new case, regardless of who takes the call, Lawyer A will be the Originating Attorney.  (An exception to this exclusion exists for insurance company clients.  If an attorney actively develops business from a completely new section or department of an insurance company client, that new section will be deemed a “related client.”  What is defined as a “completely new section” is subject to evaluation by the firm, and attorneys are advised to seek guidance on how this provision will be interpreted under specific factual circumstances.)
  • Referrals from existing clients.  A direct referral from an existing client is credited to the existing client’s Originating Attorney, even if the referral was made to or picked up by another attorney, unless the Receiver marketed the existing or new client and actually caused or stimulated the referral.  In some cases, equitable divisions will be determined in modified application of these rules to promote a more equitable apportionment of marketing credit.
  • Clients generated through the firm’s internet presence or as a result of the firm’s advertising or mass marketing. Client generation, for purposes of bonus eligibility, means more than just happening to have intercepted or received an incoming call that was not actually targeted to that lawyer or to the Firm specifically as a result of the lawyer’s specific, meaningful and successful marketing efforts.  
  • Existing referral sources.  Former clients, other lawyers, corporate contacts (not including insurance adjusters), professional contacts (such as physicians and other experts) and personal friends can become key sources of business because of the client referrals they make to the firm.  Fee income received due to work generated from “Relationships of Substance” (as defined below) between such a referral source and the Originating Attorney will be treated as First Degree Referrals as set forth above.

Percentages for Non-Salaried Attorneys

For non-salaried attorneys, the percentages paid on the basis of work performed are separate from, but paid with, the percentages associated with the active recruitment of new business, as set forth below.

Contingency fees. Except as set forth below, non-salaried Originating Attorneys shall receive 20% on cases in addition to the non-salaried production-based compensation, which typically range from 0 to 40 percent, based upon the amount of work performed by the non-salaried attorney in relation to the total amount of work performed by the Firm as a whole on a given matter.

Hourly fees. When non-salaried attorneys generate new clients for the firm which leads hourly fee income received as a result of a Relationship of Substance with the non-salaried attorney, that non-salaried Originating Attorney shall receive 20% of the fee income received.

Additional Terms and Conditions of Plan

Co-development of relationships.

When an non-salaried attorney receives work from a new client or referral source that is developed thereafter to a substantial degree by further efforts of salaried attorneys, the marketing incentive bonus percentages shall be allocated over time, as the business source ripens, as follows:  For the first referral event, 20% shall be awarded to the non-salaried Originating Attorney (only), unless he or she decides to share that percentage with a receiver  (salaried or non-salaried). For the second referral event, if it is made directly to the receiver because he or she worked actively and meaningfully to foster the relationship, or if the work was within a unique specialty, 10% of the fee income received shall go to the non-salaried originator, and an additional 5% shall to go a non-salaried receiver who performed the actual legal work.

Dispute resolution.

In the event of any dispute between co-originating attorneys who jointly develop new business, or between originators and the Firm regarding equitable apportionment of bonus percentages, the Firm will resolve such disputes (meaning that the President of the Firm or a Managing Partner will decide the issue). The Firm may, but is not required, to draw upon the following information in resolving any such disputes:

  • Referral source notes in Daylite;
  • Notes and memos in the file pertaining to referral history;
  • Correspondence pertaining to referral history;
  • Billing records;
  • Any other useful information.

The firm retains ultimate authority and discretion to adjudicate all aspects of this plan, including but not limited to:

  • Whether any potential client is accepted as an actual client of the firm and under what conditions;
  • Whether a client is designated a “new client” or a “related” client;
  • Which attorney is designated as the “Originating Attorney”; and
  • Continuing, modifying or terminating this plan at any time with or without notice.

It is useful to the firm, and in an attorney’s own best interest, to document the generation and referral history for any matter or source of business in which you claim an interest, and to do so contemporaneously.

Privileges and responsibilities.

The originating attorney has both privileges and responsibilities. While the Firm retains ultimate decision-making authority on all aspects pertaining to every client, the originating attorney will typically wish to be involved with those clients.  Responsibilities of the originating attorney include taking those steps necessary to ensure that all work performed for the client meets firm standards, that all charges to the client are fair and reasonable, and the client remains happy and satisfied.

Bonus calculation and payment.

Bonuses will be calculated on a quarterly basis, approved by the Firm and paid by the end of the first month following the end of the quarter or as soon thereafter as financially possible. 

Taxable income. 

All bonuses, including but not limited to those that are paid under the Marketing Incentive Program detailed in this Policy, are taxable income and will be treated as added salary so as to be subject to adjustments for all applicable taxes and withholding that applies to salary income.  

Of-counsel attorneys

Unless otherwise agreed in writing, this program applies to of-counsel attorneys, whether salaried or not.