Tyranny of the Billable Hour
I. INTRODUCTION
Of the 2000-odd complaints received by the Legal Servicers Commissioner each year, the most common cause for complaint is a dispute about legal costs. At the same time, lawyers in private law practice also identify billing as a foremost cause for complaint. The irony in clients and lawyers sharing frustration over hourly billing rates stems from the fact that the initial introduction of time based billing originated from lawyers’ desire to be efficient and to maximise their earnings and clients’ preference of only paying for time expended on their behalf.
This essay will discuss the key problems with time based billing, how these problems can be addressed, and ultimately whether the billable hour system should be brought to an end.
II. PROBLEMS WITH TIME BASED BILLING
The billable hour system provides a poor measure of the value a lawyers’ work to the client. It nonetheless provides an excellent measure of the value of a lawyer’s work to the owners of a firm, as billable hours provide a single, clear output measure that can interpret employee performance in market values with minimal mediation, delay and also bypasses the need to rely on subjective assessments by supervisors. Given the prevalent implementation of time based billing, it is clear that the profession places greater importance on the firm’s point of view. From the firm’s (employer’s) perspective, where profit and financial health are of concern, the law firm can be accurately described in terms of billable hours, rather than being described in terms of legal services which is how the client understands the value a law firm provides to it. Is this focus appropriate? More specifically, is prioritising profit appropriate?
In a variety of aspects, law firms are comparable to corporations except that as limited liability partnerships, they are legally structured in a way that maximises profit incentives. Disctinct from corporations where employees may not be rewarded
Of the 2000-odd complaints received by the Legal Servicers Commissioner each year, the most common cause for complaint is a dispute about legal costs. At the same time, lawyers in private law practice also identify billing as a foremost cause for complaint. The irony in clients and lawyers sharing frustration over hourly billing rates stems from the fact that the initial introduction of time based billing originated from lawyers’ desire to be efficient and to maximise their earnings and clients’ preference of only paying for time expended on their behalf.
This essay will discuss the key problems with time based billing, how these problems can be addressed, and ultimately whether the billable hour system should be brought to an end.
II. PROBLEMS WITH TIME BASED BILLING
The billable hour system provides a poor measure of the value a lawyers’ work to the client. It nonetheless provides an excellent measure of the value of a lawyer’s work to the owners of a firm, as billable hours provide a single, clear output measure that can interpret employee performance in market values with minimal mediation, delay and also bypasses the need to rely on subjective assessments by supervisors. Given the prevalent implementation of time based billing, it is clear that the profession places greater importance on the firm’s point of view. From the firm’s (employer’s) perspective, where profit and financial health are of concern, the law firm can be accurately described in terms of billable hours, rather than being described in terms of legal services which is how the client understands the value a law firm provides to it. Is this focus appropriate? More specifically, is prioritising profit appropriate?
In a variety of aspects, law firms are comparable to corporations except that as limited liability partnerships, they are legally structured in a way that maximises profit incentives. Disctinct from corporations where employees may not be rewarded
Bibliography: Articles/Books/Reports Balachandran, R, ‘Realistic Time Billing: In Defence of the Billable Hour’ (2011) 49(5) Law Society Journal 60 Jacobson, D, ‘Is the Billable Hour Running Out of Time?’ (2006) California Lawyer Parker, C, ‘A Critical Morality For Lawyers: Four Approaches to Lawyers’ Ethics’ (2004) 30(1) Monash University Law Review Woolley, A, ‘Evaluating Value: A Historical Case Study of the Capacity Of Alternative Billing Methods to Reform Unethical Hourly Billing’ (2005) 12(3) International Journal of the Legal Profession, 339. Works, R, ‘Death to the Billable Hour?’ (2011) 19(4) Nevada Lawyer 44 Case Law Other sources FindLaw Australia, Cut Costs: Chief Justice Tells Lawyers (3 February 2004) FindLaw Australia <http://www.findlaw.com.au/news/3879/cut-costs-chief-justice-tells-lawyers.aspx> [ 2 ]. Fortney, S, ‘The Billable Hour Derby: Empirical Data on the Problems and Pressure Points’ (2005) 33(1) Fordham Urban Law Journal, 171. [ 4 ]. Woolley, A, ‘Evaluating Value: A Historical Case Study of the Capacity Of Alternative Billing Methods to Reform Unethical Hourly Billing’ (2005) 12(3) International Journal of the Legal Profession, 346. [ 5 ]. Campbell, I & Charlesworth, S, ‘Salaried Lawyers and Billable Hours: A New Perspective From the Sociology of Work’ (2012) 19(1) International Journal of the Legal Profession, 115. [ 6 ]. Spigelman, AC Chief Justice of New South Wales, ‘Opening of Law Term Dinner, 2004’ (Speech delivered at The Law Society of New South Wales, Sydney, 2 February 2004) . [ 9 ]. Fortney, S, ‘The Billable Hour Derby: Empirical Data on the Problems and Pressure Points’ (2005) 33(1) Fordham Urban Law Journal, 178. [ 10 ]. Ward, A, 'President 's Message: The Tyranny Of The Billable Hour ' (2004) 26 Law Society of South Australia Bulletin 5. [ 12 ]. Lawyers Weekly, Scrap Time-based Billing: ALRC (2 March 2004) Lawyers Weekly . [ 15 ]. FindLaw Australia, Cut Costs: Chief Justice Tells Lawyers (3 February 2004) FindLaw Australia [ 16 ] [ 17 ]. Balachandran, R, ‘Realistic Time Billing: In Defence of the Billable Hour’ (2011) 49(5) Law Society Journal, 60.