Billable Hours Be Gone: Should the Hourly Billing System Be Replaced?

I. Introduction

Law firms have adjusted to recent generations of associates that demand a better quality of life in conjunction with their careers. [1] A young lawyer wants it all: a successful career, a family, and time for a social-life outside the office. "Work/life balance" has become a buzzword for firms attempting to recruit the best and brightest. Some firms have responded to the needs of working parents who prioritize childrearing by offering reduced and alternative working schedules. [2] Others allow associates to bill some of their time to pro bono work, which increases the esteem of the profession [3] in addition to satiating a young associate's need to make a difference. While programs such as these move toward the much sought after "work/life balance." they may not be enough to truly achieve a happy, well-balanced life.

"[Practicing law] has become a soul-destroying business. . . . The cynics flourish, while the idealists lag, jump ship, or, unable to beat the cynics, join their ranks." [4] this grim view of the legal profession is supported by the surprising number of associates that leave their firms within the first three years. [5] A NALP Foundation 1998-2003 survey of firms found that in firms of 251-500, more than half of new associates left before the end of their third year for a variety of reasons. [6] Depression, anxiety, and alcoholism are more prevalent in lawyers than most other professions. [7] While the unhappiness is partly attributed to difficulty coping with an inherently adversarial system, much of the stress and pressure that causes attrition results from the sheer number of hours required. [8]

II. Work/Life Balance

Some firms have attempted to help partners and associates keep a balance between their work and families. Virginia Seitz, a partner at Sidley Austin, maintains this balance by working part-time. [9] Sidley seems supportive of work/life balance, with 35 to 40 partners working part-time. [10] However, part-time for Seitz is still a nine hour day, arriving in the office by 6 a.m. in order to leave before 3 p.m. [11] Her 45 hour work week is within Sidley's definition of part-time, anything less than 100% of their yearly billable hours. [12]

Other firms allow full-time status employees to work late from home after they have spent time with their children and put them to bed. [13] In these cases, the lawyer does not actually bill less hours; he merely sacrifices sleep instead of time with his child. To prevent employees from having to miss work in the case of childcare emergencies, firms such as Fulbright & Jaworski subsidize emergency childcare. [14] For more information on flexible work schedules, refer to the related article by Karen Lee located here. [15]

Working part-time or telecommuting from home may be an option for some employees, but for the majority of associates and partners, flexible work schedules are not a feasible option. [16] Face-time with clients and coworkers is important and expected by superiors. [17] Law firms have business hours, and many expect their associates to be at their desks during the day. [18] Maintaining happy and well-balanced lawyers may require the profession as a whole to make a much greater adjustment.

III. A Bigger Problem

The ABA's Ad Hoc Committee on Billable Hours wrote that "[t]he treadmill of billable hours is depriving the legal profession of its heart and soul." [19] Although approximately 90% of firms use the billable-hour system to charge their clients as well as to determine the future of young associates, hourly billing was not always the norm. [20] The hourly billing system gained favor as firms wanted an accurate picture of how much time they were spending on each client, and clients, in turn, wanted a detailed accounting of charges they were billed. [21] As firms sought to increase their profits, the minimum hours each associate was required to bill each year also increased. [22]

In a recent article, Scott Turow discusses how the minimum billable hours expected by attorneys has increased drastically since he entered private practice in the mid-1980s. [23] While associates in large Chicago firms were then expected to bill 1,800 hours a year, today associates in those same firms can be expected to bill as many as 2,200 hours a year. [24] If the estimate is correct that a lawyer must work three hours for every two hours billed, [25] those attorneys are fast approaching a seventy hour work week (optimistically and perhaps unrealistically accounting for two weeks of vacation, sick days, or personal time off). Mr. Turow criticizes the trend in increased billable hours as harming clients by discouraging lawyers to be as efficient as possible. [26]

IV. Hourly Billing Alternatives

There are alternatives to hourly billing. These include charging the client a contingency fee, adjusting the bill in light of the outcome or complexity of the work, [27] and averaging the rates of partners and associates. [28] Shepherd Law Group, a firm in Boston, has had success in a flat fee system, charged to the client either annually or per job requested. [29] Charging the client a flat rate serves as an incentive to the lawyer to work as efficiently as possible while encouraging the client to fully utilize the lawyer's advice and counsel without worrying how much each conversation is costing him. [30] Shepherd's flat rate service not only equates to a 30% savings to one of his clients, but since the attorneys are not mandated a certain amount of time to spend on the case file, his employees have more time to spend on activities that are important to them: time with family, pro bono work, and community service. [31]

While the ABA encourages and offers support in exploring new methods of billing, [32] there is an ease and fairness to hourly billing that no alternative has yet to replace. [33] In response to Mr. Turow's article, a retired lawyer retorted, "omplaining about 'the billable-hours regime' is like a condemned man complaining about the executioner using a rope. If they get rid of the rope, they will substitute some other means to secure his death. It's the death penalty that is the problem not the rope." [34] Hourly billing is not to blame for the staggering workload, but the fees required of an associate who hopes to make partner one day. [35]

With starting salaries at top firms as high as $160,000, firms expect a minimum workload of 2,000 hours per year. [36] A small number of firms are experimenting with giving their associates another option. [37] Perkins Coie in Seattle, faced with raising their salaries to compete with California firms, gave their associates a choice: meet the 2,000 hour minimum requirement, or forgo the pay raise and work fewer hours. [38] Chapman and Cutler in Chicago have also given their second year associates a choice to choose between two paths: work more hours for more money, or fewer hours for less money. [39] While neither firm would give specific details about the exact trade-off, both hope to increase their retention rates. [40] With pressure to work so many hours, many associates leave after their third year, just when they are beginning to make money for the firm. [41] With 84.2% of respondents to a recent ABA Journal online survey answering they would take a reduction in pay for a reduction in hours, [42] this trade-off may payoff. Unfortunately, may associates are worried there will be a stigma associated with working fewer hours. [43] They worry they will be seen as undedicated, mediocre attorneys. [44] There will always be a hungry young associate willing to step up and put in the hours. [45]

V. Conclusion

The number of billable hours required by some firms has nearly reached its outer limit. [46] With only 24 hours in a day, the demand has gone as far as it can until mankind discovers a way to exist without sleep. While there are alternatives to hourly billing, the accountability of the system currently in place makes it a convenient and time-tested method. The demand for ever increasing salaries for everyone from young talent to senior partners makes the 60 hour workweek unlikely to shrink. Until there is enough discord in the profession to demand a better balance, and perhaps some sacrifice in salary, those who venture into life in a big firm can only expect to be pushed to their physical and emotional limits.

SOURCES

[1] Mary Flood, Pay Us Less, They Request, and Don't Work Us So Hard, Houston Chron., Apr. 16, 2007, available at http://www.abajournal.com/magazine/the_ultimate_time_money_trade_off1.

[2] See Retention and Reduced Hours, Project for Attorney Retention Website, http://www.pardc.org/Publications/retention_and_hours.shtml (discussing flexible work arrangements and retention) [hereinafter PAR].

[3] Scott Turow, The Billable Hour Must Die, ABA Journal, Aug. 2007, 30, 34, available at http://www.abajournal.com/magazine/the_billable_hour_must_die/.

[4] Alec Scott, Exile on Bay Street, Toronto Life, Sept. 2007, available at http://www.torontolife.com/features/exile-bay-street.

[5] The NALP Foundation, Keeping the Keepers II: Mobility and Management of Associates Executive Summary, available at http:www.nalpfoundation.org/webmodules/articles/anmviewer.asp?a=89 (52.3% of the class of 1998 left their firms by the end of year three). 

[6] Id.

[7] See Patrick J. Schlitz, On Being a Happy, Healthy, and Ethical Member of an Unhappy, Unhealthy, and Unethical Profession, 52 Vand. L. R. 871, 874-876 (1999).

[8] Id.

[9] Debra Bruno, "Part-Time" BigLaw Partner Leads Full Life, N.Y. Lawyer, July 16, 2007, available at http://www.nylawyer.com/display.php/file=/news/07/07/071607j.

[10] Id.

[11] Id.

[12] Id.

[13] Scott, supra note 4.

[14] Claudia Grisales, Law Firm Tackles Workers' Juggling Act, Austin American-Statesman, Aug. 22, 2007, available at http://www.statesman.com/business/content/business/stories/other/08/22/0822fulbright.html.

[15] Karen Lee, Evolution of Maternalism in Corporate Law, U. Ill. Bus. L. J., Apr. 19, 2007, http://iblsjournal.typepad.com/illinois_business_law_soc/2007/04/evolution_of_ma.html.

[16] PAR, supra note 1.

[17] Stephanie Francis Ward, Punching the Clock, ABA J., Aug. 2007, at 30, available at http://www.abajournal.com/magazine/punching_the_clock (A February memo from Mayer Brown Rowe & Maw requested that their securitization associates in New York be at their desks by 10:00 a.m.).

[18] Id.

[19] The ABA Section of Business Law Ad Hoc Committee on Billable Hours, Model Opinion/Editorial: Billable Hours – -Boon or Bane?, http://www.abanet.org/careercounsel/billable/toolkit/oped.html [hereinafter Ad Hoc Committee].

[20] Sacha Pfeiffer, Beat the Clock, The Boston Globe, Oct. 8, 2007, available at http://www.boston.com/business/globe/articles/2007/10/08/beat_the_clock.

[21] Ad Hoc Committee, supra note 14.

[22] Pfeiffer, supra note 15.

[23] Turow, supra note 3 at 34.

[24] Id. at 34.

[25] Pfeiffer, supra note 15.

[26] Turow, supra note 18, at 36.

[27] Ad Hoc Committee, supra note 14.

[28] Pfeiffer, supra note 15.

[29] Id.

[30] Id.

[31] Id.

[32] Ad Hoc Committee, supra note 14.

[33] Turow, supra note 18, at 34-35.

[34] Posting of David Giacalone to http://www.abajournal.com/magazine/the_billable_hour_must_die/ (July 26, 2007, 18:15 CDT).

[35] David Giacalone, chronomentrophobia, F/K/A, http://blogs.law.harvard.edu/ethicalesq/chronomentrophobia (April 1, 2005).

[36] Mark Donald, Every Pay Raise Has Its Price, Lawjobs.com Career Center, Aug. 2, 2007, http://www.law.com/jsp/law/careercenter/lawArticleCareerCenter.jsp?id=1185959202928.

[37]See Stephanie Francis Ward, Such a Deal, ABA. J., Oct. 2007, available at http://www.abajournal.com/magazine/such_a_deal [hereinafter Deal]; Lynne Marek, Cash Caste System: Associates Choice of Pay and Hours Levels, N.Y. Lawyer, Oct. 16, 2007, available at http://www.chron.com/disp/story.mpl/business/flood/4714709.html.

[38] Deal, supra note 32.

[39] Marek, supra note 32.

[40] Deal, supra note 32; Marek, supra note 32.

[41] Donald, supra note 31.

[42] Stephanie Francis Ward, The Ultimate Time-Money Trade-off, ABA. J., Feb. 2007, available at http://www.abajournal.com/magazine/the_ultimate_time_money_trade_off1 [hereinafter Ultimate Tradeoff].

[43] Id.

[44] Id.

[45] Donald, supra note 31.

[46] Turow, supra note 18, at 34.

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