What charges should and should not be passed on to clients?

In order to strike a balance between maximizing profits and keeping clients from feeling overcharged, firms must decide what charges are passed along to clients.

Transaction fees 

Whether or not attorneys are allowed to pass on credit card transactions fees varies by state^[1] For example, Mississippi and Florida prohibit lawyers from charging a convenience fee or passing on the credit card merchant’s fees to clients. Some states, however, do explicitly allow transaction fees.

Be sure to check with your respective bar association to determine their standing on transaction fees. Charging these fees, even if allowed by the bar association, could be a deterrent and may reduce cash flow.

Hard costs

Hard costs, where money is put out to vendors as part of matter management, include those such as expert witness fees and court reporting costs. These costs are typically passed on to clients, whether as a reimbursement or up-front payment. It’s important that these costs should not be inflated, or else they may be seen as seeking to generate a profit rather than being a pass-through item^[2].

Soft costs

These costs are related to the overhead of managing a firm, such as printing, copy charges and insurance.

The majority of lawyers do not pass these costs on their clients directly. Instead, many include them an “Administrative Fee” line item or include them in the overall cost of the case fees, whether hourly or flat. Alternatively, some firms outsource costs such as large print orders and then invoice the client directly.

References

1. Opinion on Surcharging
2. How to Ethically Bill EDiscovery Costs Back to Your Client