January 2016 e-Bulletin Resources for Lawyers

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Referral Fees and Fee Splitting


Referral fees are permitted between lawyers and paralegals under rule 3.6-6 of the Rules of Professional Conduct (the “Rules”), provided that the following conditions are met:

  • the referral must be made because of the expertise and ability of the lawyer or paralegal receiving the referral and not because of a conflict interest
  • the referral fee must be reasonable
  • the referral fee must not increase the total fee charged to the client, and
  • the client must be informed about and consent to the referral fee, confirmed in writing.

Lawyers are not permitted to pay referral fees or to give any financial or other rewards for the referral of clients by anyone who is not licensed by the Law Society of Upper Canada pursuant to rule 3.6-7 of the Rules.  In other words, lawyers may only pay a referral fee to another lawyer or paralegal in accordance with the Rules.  Nonetheless, it is important to note that the Rules do not prohibit a lawyer from

  • making an arrangement respecting the purchase and sale of a law practice when the consideration payable includes a percentage of revenues generated from the practice sold
  • entering into a lease under which a landlord directly or indirectly shares in the fees or revenues generated by the law practice, or
  • paying an employee for services, other than for referring clients, based on the revenue of the lawyer’s firm or practice.

Although lawyers and paralegals are not prohibited from accepting a referral fee from a non-lawyer or non-paralegal, a lawyer must not accept any fees that are hidden from the client.  The fiduciary relationships between lawyers and their clients require full disclosure in all financial dealings between them.  Accordingly, before a lawyer can accept any referral fee, reward, commission, or rebate from someone to whom the lawyer has referred a client, the lawyer must first fully disclose to the client the proposed financial arrangements and obtain the client's informed written consent (r. 3.6-1[2]).

Fees for professional services may be divided or split between lawyers and paralegals who are not at the same firm, if the following conditions are met

  • the fees are divided in proportion to the work done and the responsibilities assumed, and
  • the client is informed about and consents to the division of fees, confirmed in writing (r. 3.6-5).

Lawyers are not permitted to divide or split fees with anyone who is not licensed by the Law Society of Upper Canada – the lawyer may only divide or split fees with another lawyer or paralegal in accordance with the Rules

There are two exceptions outlined in rule 3.6-8 of the Rules.  Lawyers in multi-disciplinary practices may divide fees and may accept from and pay referral fees to non-lawyer partners, provided that the conditions set out in the rule are satisfied.  Lawyers who are members of inter-provincial law firms or in law partnerships with Ontario and non-Canadian lawyers may also divide fees, and may accept from and pay referral fees to their non-Canadian lawyer colleagues, if the conditions set out in the rule are met.  Lawyers should note that affiliations are not subject to the exceptions for multi-discipline practices and inter-provincial and international law firms.

Additional Resource:  Financial Management Practice Management Guideline

Visit the Your Practice section of the Law Society Gazette for Rules Recap: quarterly updates of Law Society rule and by-law amendments.

2015 Annual Report   

2015 Annual Reports are due by March 31, 2016, and must be filed through the LSUC Portal.  Lawyers and paralegals who fail to file their report by May 30, 2016 will be charged a $100 late fee and will be subject to administrative suspension.  Beginning this year, lawyers and paralegals who operate a mixed trust account will no longer have to file a Form 1: Annual Report to the Law Foundation of Ontario. Questions about mixed trust accounts have been incorporated into the 2015 Annual Reports and the information collected will be shared with the Law Foundation of Ontario.

Trust Account Reporting   

In addition to answering questions about trust accounts within the 2015 Annual Reports, all lawyers and paralegals must also immediately advise the Law Society whenever a trust account is opened or closed, at any time throughout the year, by completing the Report on Opening or Closing a Trust Account and by sending it to the By-Law Administration Services department.

Professions to be consulted on Compliance-Based Entity Regulation  

The Law Society has begun a consultation this month with lawyers, paralegals and other stakeholders on compliance-based entity regulation. The Law Society is seeking input on a series of issues and related questions, discussed in a paper released with the launch of the consultation. Feedback is being sought on questions relating to practice management systems, practice arrangements for this type of regulation, reporting responsibilities and entity registration. Information on the consultation can be found here.

Law Society Referral Service

We encourage and welcome all lawyers and paralegals to apply to join the Law Society Referral Service for 2016.  It helps to give back to the community, expand your profile and potentially generate more clients for you.  Additional information and a link to the application can be found here.

For licensees who were members of the service in 2015, your membership was automatically renewed.  You will find an invoice posted in your Portal account.  The annual membership fee is $282.50 and is due on January 31, 2016.  Unless you cancel your membership, you will be expected to pay the invoice.  We appreciate your support of our service.

Law Society Webcasting Convocation

The Law Society will continue to provide live online viewing of Convocation as part of its ongoing commitment to transparency and accessibility. Archived versions of Convocation webcasts are available for viewing from their respective pages on the Law Society’s website. These webcasts provide an up-close look at Convocation and its consideration of policy issues.

Solo and Small Firm Conference

The Law Society’s annual Solo and Small Firm Conference on June 9 is a must-attend event for 2016. You always need to be on the lookout for new ways to improve your practice's efficiency and to remain relevant to your clients' needs. We've put together an agenda packed with strategies to help you do just that.  Our presenters deliver practical advice designed specifically for the solo and small firm practitioner—whether you're just starting out, well into your career, or somewhere in between. And back by popular demand is our Exhibitor Forum, which showcases quality products and support services that help you implement your chosen strategies for success.

Get the full experience by joining us for the Treasurer’s Cocktail Reception (for live attendees) for an opportunity to network and interact with practitioners who understand the challenges and opportunities of solo and small practices.

Important Dates

January 28 - Convocation

January 31 - 2015 Affiliation Report due.

January 31 - 2015 Multi-Discipline Partnership Report due.

January 31 - Certified Specialist annual fee and annual certification report due. Failure to submit report and payment by this date will result in revocation of certification.

January 31 - Law Society Referral Service subscription fees due.

January 31 - LAWPRO 2015 Fourth Quarter Real Estate and Civil Litigation Levy Surcharge filings and applicable payments due.

February 1 - Annual Pre-Authorized Payment Plan (Annual PAP) withdrawal date.

February 5 - LAWPRO Lump Sum Payment Discount Deadline. Full payment of the 2016 premium by cheque or pre-authorized lump sum payment dated and received on or before this date will qualify for a $50 per lawyer discount.

February 25 - Convocation

February 29 - Last day to enrol in Monthly Pre-Authorized Payment Plan (Monthly PAP) for annual fee.

For more resources, visit the Manage Your Practice section under For Lawyers or phone 416-947-3315 or 1-800-668-7380 ext 3315. 


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