The billable hour: Is this the fly in the legal ointment?

Posted on 06-17-2013 by
Tags: billable hour , Latest Headlines & Stories

A New York Times op-ed built a case against the billable hour, calling it a “perverse system” comprised of overworked associates, questionable billing and “short-term profit-maximizing behavior.” The author, Steven J. Harper, describes the billable hour as a “living hell” for associates and says that this “flawed system” is taking its toll on the profession.

Is there a defense in favor of the billable hour, or would the legal profession be better off without it?

Comments


Lisa McManus
Lisa McManus
Posted on : 25 Jun 2013 4:44 PM

I disagree with opponents of the billable hour. The alternative is flat fee or value billing, both of which have the same flaws as the billable hour. Although some legal work can be billed at a flat rate, in my experience, litigation cannot. Variables such as the intractability of one's client or the opposing party, the litigation style of the opposing attorney (papering the other party to death/motions galore), and factual or legal complexity of a particular matter can make estimating a fee very difficult.

Opponents of the billable hour base their argument on the lack of predictable legal fees and the incentive for attorneys to overbill. However, if an attorney charges a flat rate that is large enough to cover contingencies and lengthy litigation but settles quickly, the client will feel overbilled and the attorney gets a windfall. While one may try to break the litigation process into phases with different flat rates for each phase, I still think the system is flawed. If an attorney bills a flat rate and the hours spent on a matter well exceed the number anticipated, an unscrupulous attorney (i.e., one who would overbill on an hourly basis) will simply not put the time and attention into the matter that it requires in favor of other more lucrative cases. Regardless of the billing structure, unscrupulous attorneys will find a way to turn it to their advantage. Clients can have more control over their legal costs by developing a solid relationship with counsel and ensuring that their counsel bills ethically. Counsel doesn't own the client; a dissatisfied client has the option of obtaining new counsel. Accordingly, counsel's incentive is to provide excellent legal services in an efficient manner in order to minimize billing. With today's tight legal market, savvy clients can determine whether their legal costs appear to be out of line, and they certainly appear to be doing this (refusing to pay for associate hours, refusing to pay for multiple attorneys on one case, requesting paralegal services where possible, etc.).  While there is a place for alternative billing, I don't think it can replace the billable hour in all cases.

Travis Burchart
Travis Burchart
Posted on : 25 Jun 2013 5:02 PM

Those are goods points from the client's viewpoint, but what about the op-ed's points re associate workloads/compensation? According to the author, "Most big firms require associates to bill at least 1,900 hours a year" (which excludes non-billable hours worked), and firms typically pay associates only a fraction of the income generated from billable hours. Fair or unfair? Or is this just a right of passage from associate to partner?

Lisa McManus
Lisa McManus
Posted on : 25 Jun 2013 5:11 PM

I think that the billable hour system within some large firms is broken; it depends on how the firm's system is set up. When I was in LL, I had an 1800 billable hour requirement, which was problematic my second year when we settled 600 cases at one time - my whole workload was gone in an instant. Although I asked multiple partners for work, I sat in the office for days on end twiddling my thumbs until I could work up my case load again. Regardless, I had that 1800 billable hour requirement; I wasn't the rainmaker but the associate, so it wasn't like I could bring the work in myself. That's an instant of how an associate could be penalized by efficiency and success.

What about pro bono hours? They benefit the firm from a PR standpoint but don't make money. Should they count toward the billable hour requirement? As far as the compensation v. workload, that has been a problem in LL from time immemorial, but the associate is really getting significant on-the-job training at a good firm (presumably), and the overhead of such an operation is generally staggering. The associate doesn't have to accept the situation; working at a smaller firm presents different opportunities and more work/life balance (again, in my experience).

Travis Burchart
Travis Burchart
Posted on : 9 Oct 2013 3:21 PM

I'd call it a right of passage, but by their very name, rights of passage have deep, long standing roots. Very difficult to unearth because those who go before expect the people behind to suffer the same rigors and proving grounds.

larzbeth
larzbeth
Posted on : 30 Mar 2014 4:57 PM

I think one of the biggest problems with the billable hour model is simply the amount of time that it takes to track hours. One of the most frustrating parts of my day every day is trying to efficiently track my various cases, particularly when I am doing a lot of small things for different cases.

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