October 10, 2012
Week 1: Hourly billing or flat-fee?
Last week, I mentioned that questions about billing are some of the more difficult questions facing new solo and small practitioners.
And by “billing questions,” I specifically mentioned these three:
- How much to charge,
- Whether I should charge traditional hourly rates or flat fees, and
- What things I can and should charge for as an attorney.
The answer to this question – what can and should you charge for as an attorney – can vary widely based on who you ask.
The prevailing opinion is that attorneys should charge for whatever they can.
This view is based upon the belief (and adage) that “all an attorney has to offer is his/her time.”
In other words, an attorney charging for his or her time is his or her only practicable income source.
So how does this translate on paper – or more specifically, on the bill?
Any use of the attorney’s time by the client is billed, usually rounded up to nearest the tenth of an hour (assuming, of course, that there’s a signed fee retainer agreement on file).
This means not only billing for the obvious lawyer tasks like document drafting or court appearances, but a host of other things, including phone calls, emails, text messages, research time, and transit time to and from court appearances.
However, there are quite a few caveats to taking this approach.
First, if you are going to charge for doing something, make sure that the client knows in advance that you are going to do so.
And this means not just putting the appropriate language into the fee retainer agreement, but explaining it to the client verbally.
That way, your client has no one to blame but him- or herself for talking your ear off on the phone for 45 minutes when only 15 of it was spent talking about the case.
It also ensures that most clients will keep their communications with you to the necessities, thus freeing up your time quite a bit.
Second, if you are going to charge for every second of your time, make sure that you do not initiate any communications, meetings, or any other time-consuming event unless it is necessary for, or at least pertinent to, the case.
Aside from angering your client, you’ll probably run afoul of an ethics rule or two if you strike up a chat with your client about Sunday’s football game and charge $100 for it.
This doesn’t mean if you contact a client with a question or update about the case and then the client steers the conversation toward something irrelevant that you shouldn’t charge for your time listening to them.
It means that you have to steer the conversation back to the case or end the conversation (if there’s nothing left to discuss) as soon as it’s polite to do so.
If you decide to engage your client in the irrelevant conversation (beyond simply being courteous and acknowledging what he or she has said), you really should turn off the billing clock at that point, since he or she isn’t paying you for your opinion on the weather.
It’s certainly a fine line, but a general rule to remember to make things easier is to only charge for client-initiated “wastes of time;” as soon as you perpetuate it, the billing clock stops.
Personally, I have a caveat to this caveat, though: refrain as much as possible from charging for irrelevant conversation initiated by the opposing-counsel; billing your client for this time drains his or her funds that much faster through no fault of the client’s.
The final caveat applies specifically to newly-minted attorneys.
As a newer attorney, things like research and document drafting may take longer for you to complete than a more experienced attorney, who probably knows exactly where to look in Westlaw and has prepared a needed document – such as a proposed findings – several times in the past.
Although it’s not fair to charge the client for this extra time that it takes you, it can be difficult to ascertain exactly how much time something should take.
As much as I hate to punt the issue, there’s no easy formula for figuring this out, and you should probably speak to a more experienced attorney in your area (hopefully, one with whom you’re already acquainted) about how much of the time you’ve spent on a project should actually be billed to the client.
As I’ve stated, this scheme is the prevailing one among most attorneys billing hourly.
Although it may not necessarily work for everyone, it should be the starting point for most.
If you decide to deviate from this plan – to, for instance, offer a discount – you are more than free to.
However, as I wrote back in April, if you are going to give any discounts – be it for rates or time – make sure that you explicitly note the discount on the bill.
As I’ve said repeatedly, billing is one of the more difficult issues facing new attorneys (and it is never an easy issue for experienced attorneys, either).
Hopefully, these posts have made it a little more traversable.