Ontario Law Society Announces New Rules for Lawyer Advertising, Plan to Cap Referral Fees

Earlier today, the Law Society of Upper Canada’s (LSUC) governing body (Convocation) announced new requirements to lawyer advertising in Ontario. Convocation’s decision was the culmination of several years of work and review, which included a special Advertising and Fee Arrangements Working Group (Working Group), two Professional Regulation Committee reports (see here and here) and consultations with practitioners and the public (see Advertising and Fee Arrangements for an overview of the LSUC’s lawyer advertising review process).

Cap on Referral Fees

In its news release, the LSUC announced that Convocation has agreed to cap and further regulate referral fees charged by lawyers or paralegals (though no cap amount or specific requirements have yet been determined or imposed). Convocation rejected an option to prohibit referral fees altogether, opting for a less restrictive approach to increase transparency and impose a referral fee cap.

The principle rationale for the upcoming changes to referral fees was a concern relating to the “lack of transparency and proportionality in referral fee arrangements” (see Fact Sheet).

Specific concerns raised in the LSUC’s review of referral fees included that clients were often not aware they were being referred, that a referral fee was being paid, the apparent rise in referral fees from 10-15% to 25-30% and related misleading advertising.

New Lawyer Advertising Rules

Convocation has also approved specific changes to the rules governing lawyer advertising in Ontario. The new rules will:

Provide detailed guidance on what awards may be used for marketing purposes. Amendments to the rules provide specific direction to the professions on the type of awards and honours that are permitted in advertising. Some of the specific prohibitions include referring to awards that are not bona fide, are likely misleading, confusing or deceptive, are not the result of a “reasonable evaluative process” or are purchased (i.e., as opposed to received by legitimate evaluation of performance).

Require licensees to identify in their advertising whether they are a lawyer or paralegal. According to the LSUC, this will enhance the public’s awareness of the different types of licences and help the public make a more informed choice of legal service provider. The changes will specifically require lawyers marketing their services to state in all marketing that they are licensed as a lawyer.

Prohibit second service opinion marketing. According to the LSUC, while the provision of second opinions is a valuable service to clients, it has concluded that the “bait and switch” practice of marketing a second opinion service is commonly undertaken to obtain a retainer not to provide a second opinion and is therefore inappropriate.

Make explicit that lawyers and paralegals may not advertise for work they are not licensed to do, not competent to do or do not intend to do. The amended rules provide additional guidance to lawyers and paralegals in these areas to ensure that they are fully aware of their obligations to the public. Some of the specific prohibitions include not marketing services that a lawyer is not currently able to competently provide or failing to clearly and prominently disclose a practice of referring clients for a fee.

The specific advertising rule changes will be made to the Rules of Professional Conduct governing advertising (Chapter 4) (see here).

The LSUC’s Working Group chair said that these new lawyer-advertising requirements are intended to reinforce the core principles that “advertising must be demonstrably true, accurate and verifiable.” The LSUC’s Working Group will continue to review contingency fee arrangements and advertising and fees in real estate.

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