1. Basis for claims to remuneration
An engagement letter is normally a contract for services, meaning that the general obligation of the client to pay remuneration resulting from section 611 of the German Civil Code (“Bürgerliches Gesetzbuch”, “BGB”) shall apply. However, this provision does not stipulate the level of the relevant remuneration.
2. Level of remuneration
2.1. Employers and executives
Client representation for employers and managers (executives, senior managers, boards) is remunerated on an hourly basis. Prior to taking on a client’s case, we will conclude individual remuneration agreements with the enterprises and executives concerned.
The level of remuneration will depend on the specific structure of the remuneration agreement. When an hourly rate is agreed upon, remuneration shall be made based on the actual time spent. The level of the hourly rate will be negotiated with the client separately for each case. We are happy to provide relevant cost estimates prior to taking on a case. Please call us to discuss.
With employees – but not with executives, senior managers, or boards – we normally do not conclude a remuneration agreement, with the exception of cases where merely initial advice is provided. The determination of the remuneration (fees and disbursements) when handling employee matters follows directly from the German Attorney Compensation Act (“Rechtsanwaltsvergütungsgesetz”, “RVG”) and will normally follow the remuneration schedule provided by section 2, subsection 2 of the RVG.
2.2.1. Initial consultation
As part of what is referred to as an initial consultation, the client shall outline his or her query and an initial conversation will be held about the general legal position. If the client is a consumer, the remuneration for this initial consultation may not amount to more than €190.00 plus value-added tax (VAT).
The costs for the initial consultation shall be offset against the costs for further involvement in the same matter.
2.2.2. Remuneration in accordance with the RVG
Kennzeichnend für das RVG ist der Grundsatz der Pauschalabgeltung, so dass die Gebühren grundsätzlich die gesamte Tätigkeit des Rechtsanwalts vom Auftrag bis zur Erledigung der Angelegenheit entgelten – und zwar völlig unabhängig vom Umfang des Arbeitsaufwands. Eine weitere Gebühr entsteht nur dann, wenn dieses ausdrücklich bestimmt ist.
Für die Berechnung der Vergütung ist zudem der Gegenstandswert oder Streitwert maßgeblich. Dieser Wert richtet sich dabei entweder unmittelbar nach den finanziellen Ansprüchen, die umstritten sind, oder aber danach, welchen wirtschaftlichen Wert ein Streit haben könnte. Zur Bestimmung der konkreten Vergütung sieht das RVG eine Gebührentabelle vor.
Auszug aus der Gebührentabelle (Anlage 2 zu § 13 Abs. 1 RVG)
|Object value in € up to||1.0 fee in €|
|Object value in € up to||1.0 fee in €|
A complete table of fees can be found on the website of the German Federal Bar.
The level of fees increases on a diminishing scale in terms of the object value for the attorney’s involvement. In other words: The higher the object value, the less the relevant fee amount will increase.
An employee with an average gross monthly salary of €2,600.00 is terminated by his or her employer. In a subsequent claim of unfair dismissal, a settlement is reached in a hearing between the parties . The following fees have been incurred in the settlement:
|1.3 procedural fee
(amount in controversy 3 x 2,600.00=€7,800.00)
|1.2 hearing fee||€547.20|
|1.0 settlement fee||€456.00|
|19% value-added tax (VAT)||€307.04|
Fees arising from out-of-court work will be credited – at least in part – towards these fees.
3. Reimbursement of costs
As a general rule, the loser in legal proceedings must also pay the winner’s costs. In other words: the winner does not pay anything. However, there are two major limitations to be noted in this respect:
The first is that the loser needs to reimburse the winner only the statutory fees. For this reason, if the winner has agreed with his or her attorney further compensation in addition to these statutory fees, the winner himself/herself must pay the difference between the statutory fees and fees that were agreed upon.
A further limitation applies to the first instance of employment proceedings, in accordance with section 12a of the German Labor Courts Act (“Arbeitsgerichtsgesetz”). In these cases, the winner has no claim to compensation for time lost or to reimbursement of costs for the use of a lawyer.
4. Legal protection insurance
Where legal protection insurance is available, we will make a request for coverage with the insurer. If the insurer has agreed to cover costs, it should however be noted also in this case that the assumption of costs for an attorney’s involvement is normally limited to statutory remuneration and that for this reason the agreed remuneration may not be fully paid for, depending on the circumstances.
5. Tax law
Definitive advice on these issues should be obtained from your accountant. Particularly in labor and employment law, however, it is generally possible for legal fees arising in connection with an employment relationship to be claimed as income-related expenses on your tax return.