Can a lawyer pay a paralegal a discretionary bonus for good work without it being an improper sharing of legal fees with a non-lawyer?
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This page answers the general question as of 1989. Ezel answers yours: whether it's allowed on your facts, under the current California Rules of Professional Conduct, with citations.
Plain-English summary
An attorney proposed supplementing a probate paralegal's regular hourly compensation with occasional bonuses when the paralegal had been particularly productive. The bonus was not bargained for based on the attorney's fee in a particular case, was not a set amount or a fixed percentage of the statutory fee, the paralegal had no expectation of it, and it did not comprise the majority of the paralegal's compensation. The attorney asked whether this would violate the prohibition on sharing legal fees with a non-lawyer.
The committee identified Rule 1-320, which prohibits a member or law firm from directly or indirectly sharing legal fees with a person or entity not licensed to practice law, and its exception (Rule 1-320(A)(3)) allowing non-member employees to be included in a compensation, profit-sharing, or retirement plan, even one based in whole or part on profit sharing, if the plan does not circumvent the rules. The committee identified that, read together, the rules allow a member to compensate non-lawyers provided the compensation does not involve the direct sharing of fees.
The committee distinguished the decisions where sharing was found: Cain v. Burns (an agreement to pay an insurance adjuster one-third of the lawyer's net fees in certain cases) and Gassman v. State Bar (paying a paralegal twenty percent of the attorney's legal fee in cases in which the paralegal participated). It concluded the bonus described falls within the exception to Rule 1-320 because it is not paid as a percentage of the lawyer's fees, is not bargained for based on the fee in a particular case, and the paralegal has no expectation of it; instead it is paid for productivity and performance on the lawyer's subjective assessment. The committee noted in a footnote that the bonus could be based on performance in a single matter so long as it meets the opinion's criteria.
Currency note
This opinion was issued in 1989, before California's November 1, 2018 adoption of the renumbered Rules of Professional Conduct. It interprets former Rule 1-320 (sharing fees with non-lawyers), which corresponds to current Rule 5.4. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule mentioned here.
Common questions
Q: Can a lawyer give a paralegal a bonus for good work?
A: Per the opinion, yes, where the bonus is not a percentage of the lawyer's fees, is not bargained for based on a case's fee, the paralegal has no expectation of it, and it rewards productivity and performance on the lawyer's subjective assessment.
Q: What kind of paralegal compensation crosses the line into fee splitting?
A: Per the opinion, paying a percentage of the lawyer's fee in cases the paralegal worked on, as in Cain v. Burns and Gassman v. State Bar, is prohibited fee splitting under Rule 1-320.
Q: Can the bonus be tied to a single matter?
A: Per the opinion (footnote), yes, the bonus could be based on the paralegal's performance or productivity in a single matter, so long as it meets the opinion's criteria.
Background and rules framework
The opinion interprets former California Rule 1-320 (sharing legal fees with non-lawyers), including the Rule 1-320(A)(3) exception for compensation and profit-sharing plans, which corresponds to ABA Model Rule 5.4. The fee-splitting line is drawn from Cain v. Burns and Gassman v. State Bar.
Citations and references
Rules of Professional Conduct (former):
- California Rule 1-320 (sharing fees with non-lawyers)
Cases:
- Cain v. Burns, 131 Cal.App.2d 439 (1955)
- Gassman v. State Bar, 18 Cal.3d 125 (1976)
See also
- LACBA Ethics Op. 479: Disclosure and Consent to Fee Arrangements and Productivity Standards
- LACBA Ethics Op. 461: Recouping Office Costs Versus Fee Splitting
- LACBA Ethics Op. 510: Fee Sharing With a Financial Planning Company Employer
Source
- Landing page: https://lacba.org/?pg=ethics-opinions
- Original PDF: https://lacba.org/docDownload/2010994
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