Is the billable hour dead? Alternatives abound for attorneys brave enough to cash in

Listen to this article

Lawyers can find alternatives to the billable hour, but they have to be brave enough to embrace them.

“You have to ask yourself, ‘Are you ready to have the confidence to do it? Do you have the confidence to quote for a full project and then not waiver when you didn’t estimate right? Are you ready?’” says Shayna Borakove, owner and founder of Borakove Osman LLC in Madison.

“You better know your practice. You have to be confident in skills. And you’ve got to research it. It’s not like, ‘I’m going to try a flat fee.’ You’re a lawyer. You’re a professional. And people are trusting you. If you’re going to sign up for a system of billing, you sign up for it.”

Borakove signed up for such an alternative structure when she and her partner, Peter Osman, opened their firm in 2011.

For Borakove, the system benefited not only her practice, which is mostly primarily in estate and business planning, but also her sanity.

“I would not be in the practice of law if how I got money was through a billable hour,” Borakove said. “I hear the words ‘billable hour,’ and I get stressed out.”

She’s not alone.

Since 2008, firms have increasingly drifted away from their once-rainmaking reliance on billable hours. Research meanwhile suggests that faith in the system has waned.

In 2009, legal consulting firm Altman Weil reported that 28 percent of the chairmen and managing partners at national law firms attested to a belief that the move away from billable hours was part of a more or less permanent trend. By 2014, the number had jumped to 82 percent.

At the same time, according to ALM Legal Intelligence, 62 percent of the national law firms polled saw an increase between 2010 and 2011 in the use of alternative-fee agreements.

Why the shift?

Some blame the recession of 2008 and, in the wake of the largest economic collapse since the Great Depression, clients’ intolerance for paying much for anything, especially lawyers.

Others, such as lawyer Chris Van Wagner, said the move away from billable hours is partly a natural response to a system that not only fosters inefficiency but also rewards it.

“When I hear the term ‘billable hour,’ I break out in hives. I hate it,” said Van Wagner, a criminal and OWI defense attorney in Madison. “It’s really a chore to keep track of all your time accurately. It adds 20 percent to the workweek. And you, inevitably, miss some of the time you work, so there’s a lot of time spillage and time lost.”

He should know.

A former assistant state prosecutor in New Jersey who also worked a few years as a federal prosecutor, Van Wagner spent part of his nearly 35-year career in corporate litigation at a large firm in Chicago, where attorneys were required to file electronic time records every other Monday.

“I jokingly referred to every other Monday afternoon as fiction-writing hour,” Van Wagner said. “Many attorneys had crude and inefficient ways to tracking their time, and many other attorneys were simply overtaxed by their workload and lost track of it.”

It all led to a flurry of schedule reviews and reconstructed timelines, few with a real chance at being accurate. So Wagner, when he decided to go out on his own in 2014, knew it would not be wise to make his paycheck depend on punching clocks. He instead turned to a fixed-fee structure.

“If you want to call me Jiffy Lube, you can; it’s a bit more complicated than that.”

Basically, Van Wagner gets paid for every service he provides. Clients pay a certain amount for an uncontested case and then kick in more if the proceedings advance to a motion hearing or to trial.

Whatever the package, Van Wagner said, “They know going in what the cost is for a particular task or series of tasks. The client knows coming in what their budget is going to be, in all likelihood. There are asterisks, but they know that coming in.”

Some clients, worried they might not be getting the best deal possible, have asked to pay by the hour. But few press the issue after Van Wagner explains the likely benefits of doing things his way. The price of a particular bundle of services, for instance, could be about $3,000. In contrast, spending 40 hours to pursue a motion, with no guarantee of success, might rise as high as $10,000.

Abandoning billable hours gives clients some freedom to make decisions otherwise prohibited by their pocketbooks, Van Wagner said. It also requires him to know how much time he is likely to spend on each phase of a case. Accurate predictions are essential if he’s going to be certain that he’s getting paid in keeping with his efforts. For this reason, alternatives to billable hours are not for every attorney.

“The idea of a fixed advance fee does not fit every kind of legal representation. And I’m certainly in the minority of practice areas where it works,” Van Wagner said. “You could never use it in corporate litigation, because you cannot predict at the outset how much time is going to be used. You might be able to use it in family court work, so long as you build in the right to charge more in certain circumstances. But, if you do, you still have to keep track of your time to justify the expense.”

Borakove agreed.

“In estate planning, the billable hour is dead,” she said. “For certain transactional work, where you focus on certain types of law you’ve done repeatedly, the billable hour almost fosters inefficiency. But I think some areas of the law are going to be very difficult to abandon the billable hour. There are just too many unexpected variables.”