April 9, 2013
The debate over the wisdom of the billable hour has once again come alive in the blawgosphere in the wake of the recent disclosure of indiscreet emails exchanged by DLA Piper lawyers and Steven Harper’s recent op-ed in the New York Times, “The Tyranny of the Billable Hour.”
Harper’s commentary very nearly gets it right. In a larger firm, billing by the hour tends to be abused because the associates and junior partners serve two masters: the client and the firm. The requirement to bill a certain number of hours per year, combined with the lack of discretion over what time is ultimately charged to the client, sometimes results in exorbitant bills to the clients.
But the problem is not that charging by the hour is inherently unethical or that an alternative fee arrangement is inherently fairer or more cost effective for the client. Time is a commodity. There are only so many working hours in a week. If you want a piece of my time, you pay for it. But as a sole practitioner, I have completely control over the fees I charge my clients. I am sensitive to the idea that clients do not want to be nickeled and dimed for every voicemail, email, and text message. So I write off, on average, about 10% to 20% of the time I spend on client matters. None of my clients complain that I bill by the hour.
Alternative fees certainly have their place. Both corporate and individual clients may like the certainty of a flat fee. As I point out in my presentation on alternative fees, however, flat fees may require the lawyer to take on a risk that is not present with hourly fees: the risk that the matter will take more time than the lawyer expected, perhaps because of facts the lawyer does not yet know. This is one reason why it is so difficult to implement flat fees for litigation- the course of the matter is unpredictable.
Nor are flat fees inherently more fair than hourly fees. Not too long ago I hired a plumber who would only quote me a flat fee for a rather small job. I was suspicious but I needed the work done. Sure enough, the job went quickly and I ended up paying more on an hourly basis than I charge my clients for legal work. And I felt ripped off and I will never hire that company again.
It’s not the billable hour that is bad; it’s the abuse of it that gives lawyers a bad name.