Today's Economy Prompts Rethinking the Billable Hour

We've written a lot about the billable hour from various perspectives, and have considered some alternative billing arrangements available to lawyers and clients.  Lately, the health of the global economy has been making news headlines daily and, as a recent article in the Washington Post observes, the larger and more intense economic pressures are forcing many clients and lawyers to seriously reconsider how fees for legal services are billed.

In-house lawyers are leading the efforts to question, and perhaps abandon, hourly billing by the law firms that represent their companies.  Today's economic challenges are compelling in-house attorneys to significantly reduce their own costs, while fees paid to outside law firms have tended to increase at rates higher than employee salaries, energy costs, and other business expenses.

As usual, outside  lawyers and law firms hold widely differing opinions on the merits of the billable hour.  Some outside attorneys who support hourly billing explain that they work efficiently and bill clients only for the efficient use of their time.  Moreover, they note, it can be very hard to estimate in advance how much time a client's matter will require, and that uncertainty could create a fixed-fee arrangement that might not suffice to cover the attorneys' work on that matter.

Other lawyers are more willing to explore alternative arrangements for calculating their fees.  At the request of in-house counsel, those alternatives will likely include fixed rates, lower rates in exchange for bonuses for performance, volume discounts, and alternative ways of pricing legal services.  In some cases, a law firm's revenue might increase, particularly if the firm can use the alternative billing approaches to retain existing clients and attract new ones.

What will happen to the billable hour?  It's hard to say at this point, and hourly billing's supporters and detractors continue to make persuasive arguments for and against it.  These days, however, the state of the economy will likely exert more influence over the debate and be considered a significant point in determining whether to keep, abandon, or modify lawyers' hourly fee arrangements with clients.

By Steve Imparl, guest blogger