Firms often try to motivate lawyers to join and stay at their firm by adding “incentive compensation” to the attorney’s salary in the form of a percentage share of the collected billings the lawyer generates. Such an arrangement can be advantageous to both the firm and the attorney. If not properly or completely memorialized in the employment agreement with the attorney, however, such an arrangement can lead to disputes subverting the lawyer’s relationship with the firm, the firm’s attorneys, and even the clients.
There is no general regulation of “fee sharing” or “origination fees” arising from employment agreements between a law firm and attorneys it employs or hires. Although Rule of Professional Conduct (RPC) 1.5(e) generally prohibits the sharing of fees unless tied to performance of services, such prohibition is expressly limited to “a division of fee between lawyers who are notin the same firm.” K. Michels, New Jersey Attorney Ethics §36:6-1, at 886 (2013) (emphasis added). (“When attorneys within one firm divide a single fee between them, that division is not regulated by RPC 1.5(e).”)
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