Why the billable hour misses the point.

“Time keeps on slippin’, slippin’, slippin’ into the future ….”

—Steve Miller, “Fly Like an Eagle”

When the Steve Miller Band released “Fly Like an Eagle” in May 1976, I had just learned that I would be allowed to return for year two at Our Lady of Perpetual Pain, also then known as John Marshall Law School. My head was still swimming in torts, contracts, civil procedure, and the Uniform Commercial Code. I had no idea how time would come to control my future life as a lawyer—as it controls me to this day.

Our friends and colleagues in the tort and criminal defense bar probably have little, if any, idea how the rest of us are beholden to our professional golden calf, the billable hour. Having long labored—chained much like Jacob Marley to the billable hour for lo these 40 plus years—I think it high time that we revisit the billable hour as the prevailing metric for production and performance of lawyers. And I’m not alone.

A recent study by Patrick R. Krill, of Krill Strategies, LLC, of Minneapolis, in conjunction with the University of Minnesota’s Department of Psychiatry and Behavioral Sciences, produced what some might consider a Duh! moment: A firm focus on productivity (billing hours) and profitability leads to increased stress and negatively impacts lawyer wellness. The study, “People, Professionals and Profit Centers: The Connection Between Lawyer Well-Being and Employer Values,” can be found online. Not surprisingly, the authors conclude that a firm culture that values professionalism and individual growth over production and profit can significantly reduce the stressors on lawyers, which the study shows affects young and female lawyers disproportionately compared with others.

The era of the billable hour

As a young lawyer, I began practice at the very beginning of the era of the focus on the billable hour, a trend that was brought about in large measure by the death knell of bar association fee schedules. For decades, if not longer, local bar associations established schedules for minimum fees to be charged for certain legal services, and those schedules effectively governed the fees that were charged by lawyers in those localities. In fact, in 1961, the American Bar Association Committee on Professional Ethics authored Opinion 302, suggesting that a lawyer who “habitually” did not charge the minimum fees established by schedule might be engaging in unethical conduct.

However, by the early 1970s, criticism of fee schedules as restraint of trade drew the attention of the U.S. Department of Justice, and the matter was conclusively settled by the U.S. Supreme Court in its 1975 decision in Goldfarb v. Virginia State Bar. The Court reversed the exemption the Fourth Circuit Appellate Court had determined existed in favor of bar associations because they were not engaged in “trade or commerce” as defined by the Sherman Act, but rather in a “learned profession” exempt from the clutches of antitrust laws. The Supreme Court found that the threat to discipline attorneys for failure to follow fee schedules amounted to “price fixing” and constituted a private, anticompetitive activity that violated section 1 of the Sherman Act.

My intent here is not to wax nostalgic about the halcyon days of the Burger Court (which also gave us lawyer advertising), but rather to note that in the intervening decades, while caselaw has come up with a variety of factors for courts to consider, the determination of what is or is not a reasonable fee boils down to this salient and controlling factor: How many hours, counsel?

And therein lies the rub. We all know that if we’re being paid by the hour, our fee is going to be determined not by how brilliant of a lawyer we are, or how much experience we have, or how novel and successful our arguments might have been, or how nice of an outcome we secured for the client. Fees are determined by billable hours, period. There is no consideration of the value we added or used to achieve a good outcome for our client. Not only does this focus on billable hours increase lawyer stress and hurt lawyer wellness, I suggest it does the most disadvantage to the folks paying the tab: the clients.

We need to reevaluate using the billable hour as the controlling metric for fees, not just because it negatively affects lawyers’ wellness, but because it negatively affects the public we serve. Focusing solely on billable hours as a form of compensation has the unintended effect of concentrating lawyers’ attention on the billable hour, not what is or might best be done to advance the client’s interests.

It is long past time for lawyers to work with judges and examine the role of the billable hour in conjunction with lawyer wellness, and the ineffective and inefficient way it serves the public good generally and the individual client’s best interests specifically. It is a topic I plan to explore and have already discussed with several judges and lawyers. While we obviously cannot eliminate the billable hour as a metric of lawyer compensation, we can all work together to eliminate it as the metric of lawyer compensation in favor of a system that recognizes the true value of a lawyer’s service to each individual client.

There is another reason to reexamine our focus on the billable hour, productivity, and profitability, and that is the attempt by some outside our legal community to commoditize what we do, so as to enable nonlawyers to profit from our services. The ISBA has stood steadfast against the growing movement toward authorizing nonlawyer ownership of law firms. The more we commoditize what we do, the stronger the argument that we’re not a learned profession that can be sold to the highest bidder.

More on that next month.