The Law Society of Upper Canada's governing body has agreed in principle to cap and further regulate the fees that a lawyer or paralegal may charge for referring a client to another licensee.

The policy change has been recommended in a report by the Advertising and Fee Arrangements Issues Working group to address concerns about a lack of transparency and proportionality in referral fee arrangements.

The Working Group will return to the governing body - called Convocation - later this year with recommendations for the cap amount and additional requirements to increase transparency in marketing and to ensure genuine consent for referral fee arrangements.

The Law Society - which regulates Ontario's 49,000 lawyers and 7,900 paralegals - says it is enforcing transparency and proportionality in referral fee arrangements by setting a limit on the amount that can be charged for referrals and establishing requirements to make sure clients understand the process.

The Working Group found that clients are often not aware that they are being referred, or that there is a fee involved in the referral. It says that referral fees that were once in the range of 10-15% are now in the range of 25-30%, and misleading advertising is fueling the lack of transparency in referral fees.

Changes to advertising requirements

Convocation has also strengthened the rules governing the advertising of legal services, and added new public protection measures.

The new advertising rules include:

Detailed guidance on what awards may be used for marketing purposes: Amendments to the rules provide specific direction to the profession on the type of awards and honours that are permitted in advertising.

Licensees required to identify whether they are a lawyer or paralegal: This is intended to enhance the public's awareness of the different types of licences and help the public make a more informed choice of legal services provider.

Prohibition on advertising of second opinion services: The Working Group says it found found that the main purpose of second-opinion advertising was to attract already-represented clients with the intention of having the client switch lawyer or paralegal -- rather than to market valuable second-opinion services. Under the new rules, second opinion services are still permitted, but advertising is not.

Making 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: Additional guidance on this has been provided to lawyers and paralegals to make sure they are fully aware of their obligations to the public.