The Tyranny of the Billable Hour

Unless you work for the government or in-house, as an attorney, your bread and butter is the billable hour. Some other professionals, like accountants, also bill time, but this blog is not about accountants and also no one cares (actually I'm sure the same issues arise for them). Anyway, the premise is simple enough: you keep track of the time you spend working on the client's stuff, the firm bills the client at a predetermined rate for this time, and the firm gives you credit for however many hours it billed on your behalf. And it seems fair enough: the client pays for your time, which, as a professional, is your most valuable asset, and the firm, who usually sets minimum billing requirements, gives you the proper incentive to be consistently billing your time (see generally Agency Theory). Nonetheless, this system can be a source of misery for the uninitiated.

Most firms require associates to bill between 1,800 and 2,000 hours per year. My firm remains, fortunately, at the lower end of this spectrum. But if you've never had such requirement (and even if you have), this number isn't very meaningful. So let's break it down:

Let's assume we are working five days a week (more on that later). There are 52 weeks in a year, but we should account for the firm holidays (Christmas, New Years, Thanksgiving, maybe a few others) and allow a few more days for sick and/or vacation days (more on those later). That puts us at effectively 49 weeks of actual work days. That gives us (49 x 5 = 245) 245 actual work days in a year. If you divide 1,800 hours by 245 you get approximately 7.35, which means you need to bill 7.35 hours per work day to reach your minimum requirement.

How hard is that? Most people work 8-hour days right? Heck, 7.35 means I can show up at 9AM, take 39 minutes for lunch, and leave at 5PM! I thought those crotchety old lawyers told me I would be working nights and weekends. Not so fast, person who uses the word crotchety, 7.35 means 7.35 hours of actual legal work that is ultimately billed to (and paid by) the client. You see, my explanation of the premise above was a little oversimplified. That premise assumes that: (1) the work you are doing is actually billable, (2) the billing partner will actually bill to the client all the time you've recorded (and not "write it off/down"), (3) the client will actually pay the bill it receives (and not request a "write off" or just be a full-on deadbeat and not pay his bill). You are likely to encounter all three of these scenarios throughout the year, and probably each a few times.

For example, what is not billable time? Time spent doing all manner of administrative things: firm meetings, practice group meetings, training, firm retreats, CLEs are not. Neither is "client development/management" time: time you spend preparing and giving presentations to clients or potential clients, writing legal blog posts (substantive ones, i.e, not this one) or articles on breaking legal issues, going to social or professional events both formal and informal.

Why would a partner write off or write down your time? Perhaps the client requested it: the bill is just too big or she just doesn't understand why you need to research filing deadlines.You are a young lawyer: it might take you ten hours to figure out how and to write a motion to compel, while a more experienced attorney might crank one out in a few hours. Even if it does legitimately take that long because the facts are complicated, it might just be too hard to sell a 10-hour billing entry for what is relatively routine motion practice. With the swipe of a pen (or the click of a mouse), there goes a whole day of what you thought was billable work.

How do you combat these billing demons? As a new associate, no one (unless you are lucky) will speak to you frankly about the nuances of actual billing practice. Sure, they may give you some generally-accepted tips about making sure your billing entries are descriptive and understandable. You may even get a few gems like "Break down tasks into their smallest components" or even "Don't bill whole numbers, they make clients think you are rounding up."

But you will find that most attorneys treat their real billing rules like proprietary information. Why? First, while it may not seem so, you are in competition with the other (likely senior) attorneys working on your file. The client is only going to pay so much, especially if they are on a retainer, so if you are "padding" your time that means there's less to go around. Second, some of these methods are not exactly kosher.

Let me walk that back a bit. The reason I put "padding" in quotation marks is because some of these methods are arguably legitimate. For example, one form of padding, "double billing," occurs when you can bill two clients (or the same client twice) for the same time. This frequently happens during travel. If you've got to fly to Florida to take a deposition, you are billing your travel time. During that time you are also probably working on client matters, often the client on whose behalf you are going to the deposition, and hence you are billing twice -- once for the travel and once for the work.

But more often "padding" takes the form of what one partner I work for calls "value billing." While alternative fee arrangements do exist for this sort of thing, he does it on a more informal basis. That is, he has developed a sense for how long a certain task, such as writing an asset purchase agreement, should take, say ten hours (obviously more complicated deals with a lot of back and forth could take much longer than this). If he has a well-worn template that he uses to draft these things, such that it only actually takes him a few hours to fill it out, he still bills ten hours because that's the "value" of the product he's provided. If this sounds scandalous to you, consider what I talked about a few paragraphs above where my work got written off because the time I spent seemed too long. This is just the inverse scenario. In sum, it's the "bill what you can get away with" school of thought, which is actually what most padding -- legitimate or not -- boils down too.

Moreover, the whole billable hour system raises a slew of ethical and quasi-philosophical questions. What counts as time working on a matter? It can't just be the time I'm sitting down and actively typing a draft of a motion or the time I'm sitting in a deposition or standing trying a case. Obviously, those things entail a plethora of sub-tasks, some clearly lawyerly (researching case law for a motion), others decidedly common (walking to court), others a little little of both (reading through records to find relevant information). All of those things are clearly billable.  But what about a step removed from those things? For instance, I grab some coffee or go to the bathroom. Or I take a walk to clear my head.  Or I call it a night and go home and ponder what my strategy should be. Again, my answer is yes, that these things are all part of the process for which a client is paying you. But at the same time, a client would might be understandably hesitant to pay for them.

Lastly, and the real reason I wrote this post, is that minimum billable hour requirements mean attorneys have a never-ending source of stress. Either they are working on billable matters and are worried about (1) doing a good job and (2) billing the work so as to get paid for doing it, OR they are not working on billable hours and stressing about the most expeditious way to get back to doing billable work. Indeed, for every week that you are humming along billing 8, 9, or 10 hours per day, you will have a day or even days where you struggle to bill much of anything. In such a feast-or-famine environment, when the work is there you must feast upon it; hence, the aforementioned working of nights and weekends. The subject of what to do in those dry spells (or during influxes of non-billable work) might be the subject of another post ... just as soon as I figure it out myself.