There are certain topics of conversation that are best avoided, religion, politics and money, are dangerous conversation starters. As is the billable hour and the future of legal billing within the legal fraternity, a hotly debated topic, with clear supporters and opposers to same, creating tension and triggering true lawyerly instincts of argumentative stances and hand gestures.
Those that support it maintain that legal professionals sell their time and given the uncertainty, complexity and intricacies associated with litigation, frequently not apparent at first glance due to the clients distorting the true state of affairs, the time required to resolve the matter is more than initially advised. Practice has indicated that as the legal matter progresses and the truth is slowly unravelled, the matter is revealed to be far more complex than initially anticipated, requiring significantly more legal work and time. Considering this flawed nature of any legal matter, there is no other way to determine the value of the work required other than charging a fee per hour, encapsulated in the billable hour.
Those that oppose it maintain that legal billing and the traditional billable hour serves to encourage slow, inefficient time management and legal practice. The opposers argue that the billable hour itself is archaic and outdated, based on past practices no longer aligned to the needs and wants of clients, who seek certainty, speed, efficiency and effectiveness. They maintain that legal practice and experience provide legal professional’s with the knowledge to in the very least estimate the time involved in any legal matter, allowing for the factoring in of safety margins to provide for more intricacies and complexities that are later revealed by clients or that are suspected. Thus, legal professionals are more than capable of providing an accurate estimation of the time involved in resolving a legal matter and agreeing to a fixed fee or monthly subscription based on the nature of the legal services required.
The above is merely some of the points discussed, debated and considered in the Futures Law Faculty panel discussion on the Future of Legal Billing, held 23 May 2019 . The panel, substantially diverse with Stan Horowitz, a well experienced legal tax consultant, Graeme Wilson, the founder and director of Whipping the Cat ; Rico Burnet from Exigent and Natalie McGovender, practising attorney at De Beers Attorneys, facilitated by Delia McAuther, CEO of Law For All, provided for thought provoking statements and friendly debate.
Some of the alternatives to the billable hour that have been or are currently being used by some of the panellists and which is gaining increasing popularity overseas include:
The Alternative Fee Arrangement, which involves agreeing to a fixed, flat fee for legal work to be performed, irrespective of the hours spent on it. This ultimately shifts the risk from the client to the legal professional and his/her firm. Alternatively there is outsourcing basic, administrative aspects of legal work to lower cost legal service providers while the attorneys then focus on the more complex aspects of the client’s matter. The costs saved in having the mundane administrative aspects of the legal case dealt with by a lower cost legal service provider serves to shift the value in the form of savings back to the client (Jeff Gray – Are Lawyers Facing the End of the Billable Hour – November 2013 (updated May 2017) https://www.theglobeandmail.com/report-on-business/industry-news/the-law-page/the-end-of-the-billable-hour/article15641507/)
Apart from clearly making law more accessible and affordable and saving money for clients to spend on more necessitated legal services or products, a change in the billable hour will also it is said create deeper and closer client relations. This was most recently seen with Microsoft’s legal department, who during 2017 announced that it would be moving away from the billable hour fee agreements which it had in respect of most of its legal matters and rather would have legal work done internally and outsourced to one legal firm (Perkins Coie). The legal services are provided on a retainer basis with performance bonuses. Commenting on the effect this had, Microsoft’s legal department provided that it effectively serves to blur the lines between inhouse and external legal counsel which has the consequential effect of merging the legal counsel in the client’s business to such an extent that the legal counsel effectively becomes hypothetically speaking part of the client’s business. This enables legal counsel to fully understand their client’s business and legal needs and requirements and in light of same, enables them to curate legal services and advices, tailor made for their clients, thereby fostering a closer more committed relationship as all the parties effectively have the same goal. (Niel Suggs and Judy Jennison – Beyond the Billable Hour: It’s Not About Economics—It’s About Relationships – December 2018 – https://www.law.com/corpcounsel/2018/12/17/beyond-the-billable-hour-its-not-about-economics-its-about-relationships/?slreturn=20190317074559)
The above type of relationship is in all likelihood going to become increasingly important if not necessary in the current “Fourth Industrial Revolution” given the fast pace at which technology and software is developing, with most business and companies having to digitalise some way or other to retain their market share. However, the faster the technology and software development occurs, the bigger the gap between the technology and law becomes, often resulting with clients sitting with questions relating to the legal regulation of a tech but which is not covered by our common law or existing legal precedents. This unchartered water will be less intimidating and overwhelming where the legal professional knows what the client’s business is about, how the tech and products are applied and thus what type of law and interpretations and applications would be applicable, perhaps even in the process creating new legal precedent – a dream we all had a law students and only very few legal professionals have had the privileging to achieve.
Contrary to the very nature of legal proceedings and against the grain of all legal professionals, with legal matters coming to a decisive conclusion based on arguments backed up by evidence and testimony, the panellist discussion after back and forth debate between the supporters and opposers of the billable hour, agreed to disagree on the billable hour and alternatives that could better serve in its place. Taking all panellist arguments and points into account, it could be said that in the end it was no so much about the billable hour than about the ethical lawyer.
Whatever your view on the billable hour, there is little doubt that legal professionals sell their time and as a result of that all alternative billing techniques involve an element of the billable hour as there is no other way of determining the value of intangible services provided other than by the hours of work spent on same. However, whichever means of legal billing is followed, whether it allows for a fixed fee based on the estimated time to resolve a legal matter or whether the traditional billable hour is used to determine the value of legal services provided and performed, legal professionals should ultimately be guided by their ethical duty and ensuring justice to all. In the end it is no so much about the legal fees, costs or even the billable hour, it’s about our love of the law and the principles that it enshrines, our ethical duty to uphold the law and ensure efficient and effective legal advise and services, providing for the resolution of legal disputes and problems, offering support, guidance and direction to our clients to ensure access to law and justice to all.
For more information see www.futureslawfaculty.co.za
Author:
Kristi Erasmus
Head of Faculty – Futures Law Faculty
Futurist in the making and admitted attorney
