Tampa client got a $38,000 refund from TECO based on my findings. Now their controller says the company spent roughly $2,000 in internal staff time gathering bills and coordinating with the utility. She wants to deduct that $2,000 from the recovery before calculating my 40% — so my fee would be based on $36,000 instead of $38,000. Is this normal?
Client wants to deduct their internal labor costs from the recovery before calculating my fee
No. Your fee is based on the recovery from the utility, not the client's net proceeds after their own costs. Their internal costs are their operating expenses. My engagement agreement specifically says: contingency fee shall be calculated on the gross recovery amount as confirmed by the utility, before deduction of any client costs, taxes, or internal expenses. Without that language you get nickel-and-dimed every time.
Tony is correct and his contract language is essential. The client's internal cost of gathering bills is not a deduction from the recovery — it's the client's cost of participating in the process. Your fee is earned by identifying the error and securing the refund. The gross recovery is the appropriate fee basis. Add explicit 'gross recovery' language to your engagement agreement to prevent this discussion from recurring.
Showed the controller Tony's reasoning and pointed to my agreement which says 'verified recovery amount.' She agreed that's the gross number. Paid my fee on the full $38,000. Adding the explicit 'before deduction of client costs' language to future agreements.