3. Built-in obfuscation
At the end of the last chapter, I explained that in order to understand what is wrong with the billable hour, it isn’t sufficient just to join in the mantra that lawyers are under pressure to bill too much time. It’s also necessary to look into the minutiae of what is actually involved in keeping time records. Only then does one see the inherent flaws of a billing policy that relies more or less entirely on those records. So, down to detail...
Daily totals
The billable hour promises transparency. In practice, what clients often experience is obfuscation. This occurs with even the most basic aspects of the billable hour’s implementation.
In most firms, lawyers keep daily records of how much time was spent on matters, but do not separately record the time spent on individual tasks during a day that relate to each matter.
Assume, for example, that a law firm represents a client with several different “matters” that are active — a “matter” might be a lawsuit, a transaction, an area of ongoing advice, or whatever. Time for that client is typically recorded and billed separately for each matter.
Usually, however, time is not broken down by “task” within each matter on those days when more than one task was performed. Thus, a typical daily time record might read:
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Telephone conference with opposing counsel re objections to discovery requests. Letter to opposing counsel confirming points agreed. Start to research and write motion for summary judgment. Telephone conference with client on developments. Travel to and interview with Fred Smith, witness, at his office. 4.8 hours.
In that example, the client receives a figure for the total amount of time spent on a given day, but not the time that was devoted to each different task.
Did the conference with opposing counsel take three minutes or 10 or 20 times that amount? Is one paying for 15 minutes of travel time or two hours? Was the legal work on the motion a major chunk of the day’s work, or just a quarter of an hour?
This clearly reduces the transparency that hourly billing is meant to provide.
Monthly totals
In fact, some lawyers who bill by the hour only provide monthly, not daily, totals. These make it even harder to figure out how much time was spent on which tasks.
Under that protocol, an invoice sent out by a lawyer who charges by the hour contains a consolidated description of work performed over a month. That description ends with a time total for that month and, perhaps, a list of the dates on which any work was performed — but without an indication of what work was performed on each of those dates, let alone how long it took.
That method appears to offer the worst of all worlds. It doesn’t address the fundamental flaws of hourly billing that are discussed in this book. But it deprives the client of much of the information that supposedly makes hourly billing worthwhile.
To be fair, proponents of this method may also suggest that the overall descriptions of the month’s work should be detailed. They simply don’t want lawyers to tell clients too much about when work was done and how long each portion of the month’s work actually took. Rather, the client is expected to trust in the lawyer to present an accurate bill, which doesn’t invite scrutiny with regard to those details. It’s a system dictated by the interests of the lawyer, not the client.
Monthly descriptions make sense if the method of billing is to assess value rather than simply to multiply hours by an hourly rate. Indeed, that was how bills were typically presented in the era that predated the onslaught of the billable hour. But if one is going to charge by the hour, monthly totals deprive the client of information that ought to be disclosed.
Recording time for each task
At the other end of the scale from lawyers who report only monthly totals are those who record time for each task during the course of a day (as opposed to keeping a cumulative total for all tasks related to a matter on a given day). In fact, some insurance companies who fund the cost of defending lawsuits demand this.
A lawyer operating under such a regime would have reported the time entry given earlier something like this:
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Telephone conference with opposing counsel re objections to discovery requests: 0.1 hours
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Letter to opposing counsel confirming points agreed: 0.2 hours
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Start to research and write motion for summary judgment: 1.0 hour
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Telephone conference with client on developments: 0.3 hours
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Travel to interview with Fred Smith, witness, at his office: 2.7 hours
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Interview with Fred Smith: 0.5 hours
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TOTAL: 4.8 hours
On the whole, lawyers don’t like keeping time records by each task. It is, in fact, quite time-consuming in itself. (That raises the issue of whether the client should pay for the time that it takes to manage the timekeeping. Many clients do end up doing so, although few would be very happy if they knew about that.)
And it exposes lawyers to greater scrutiny. It’s harder to fudge details if all the time entries for a given day are broken out than when they are merged together.
At first glance, therefore, task-based timekeeping seems better for the client, as — in theory — it’s the most transparent and accountable approach. However, as shown in the following chapter, it can backfire on clients who demand it, as it forces lawyers to apportion at least six minutes to individual tasks that might not have taken nearly that long.
If you think that six-minute charges are too small to be worth worrying out, think again. Three of them a day can easily add up to over $2,000 a month. (If you‘re wondering how, a six-minute charge based on a $350 hourly rate equals $35; three of those a day equals $105; multiply that by the number of working days in the month and you get past $2,000.)
This doesn’t mean that, after weighing the pros and cons, I necessarily favor day totals over task-based records. In my opinion, the billable hour is flawed whichever way you try to implement it.
Entire contents © 2008 John Derrick