Thursday, February 26, 2015

Kill the billable hour quota?

Sigrid Irias - a California lawyer and adjunct professor at UC Hastings points in a recent op-ed piece to hazards and evils of the billable hour quota common at large firms:

It seems a well-accepted fact that police traffic-ticket quotas lead to more unjustified tickets.
Many states recognize that unwarranted tickets are written even when unofficial quotas are used. That emphasis on quotas means fewer valuable police services not related to ticketing are provided: in short, ticket quotas do not give the taxpayers the best bang for their buck, and should be prohibited.
When Illinois adopted its own ban on ticket quotas in 2014, the state's governor observed that the change would increase public confidence. Last week it was announced that Arizona is the latest state considering a ban on ticket quotas.
Many believe more hours of less benefit to clients get billed when law firms use steep billable hour "goals." There seems to be support for this proposition not only by way of common sense-based consideration, but also in the literature, where there is no prohibition of the practice, and no rule of professional conduct has been proposed to address the issue.

Recent History

Over the last 15 years, ethicists have scrutinized the origin of escalating billable hour goals and their progeny. In August 2002, the ABA's billable hours commission noted the "corrosive effect" of billable hour goals, including that they "[penalize] the efficient and productive lawyer," and that "[t]he unending drive for billable hours has had a negative effect … on family and personal relationships." According to Yale Law School's calculations, it takes over 2,400 hours at work to actually bill 1,800 hours. Especially when the employer law firm does not have enough real billable projects for its lawyers and paralegal employees to work on, the pressure to nonetheless meet billable hours may result in what the ABA's 2002 report characterized as "aggressive time recording." In it, one writer discussed multiple ways in which hours are ultimately magnified, and the difference between time padding (tacking on extra time to a billing entry) and task padding (undertaking unnecessary tasks in order to increase the number of hours billed).
Time padding occurs when billing entries are rounded up or even fabricated. Task padding occurs, for example, when motions are frantically prepared after a verbal agreement on the terms of a settlement has been reached to ensure the maximum number of hours can be billed before the settlement is finalized in writing. As early as 2005, at least one Washington Lawyer magazine writer had warned that using billable hour goals had potential drawbacks similar to those seen with police ticketing quotas. In 2006, an article published by the ABA noted, "[f]acing such billable hour requirements, or perhaps hoping to generate more revenue or reach the next bonus threshold, some lawyers fabricate, inflate, or 'pad' their billable time." Observing that padding is "probably rather common," the author outlined in some detail various ways in which padding can be done.
Almost eight years ago, Lawrence Fox, a frequent writer on ethics issues and former co-chair of the ABA Litigation Section's "Raise the Bar" project, urged the immediate end of billable hour goals as contrary to client interests. Fox outlined the evolution of billable-hour goals as a system inherently in conflict with law firm clients' interests.
Despite these alarms, the billable hour goal system remained largely unchanged. The defenses of the system—which the ABA had reviewed in its 2002 report—included that it is relatively "simple," and that by the 21st century, the system was "entrenched."

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