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Is the billable hour a thing of the past?
Stephen Zack, President of the American Bar Association.
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JEREMY HOBSON: Lawyers have just wrapped up a conference in Atlanta focused on whether to change the way they're paid. Right now, attorneys typically bill by the hour, which might explain why lawyers are frequently at the office well into the evening. The plan on the table would, in some cases, replace the billable hour with pay based on results.
Steve Zack is the President of the American Bar Association and he joins us now from Atlanta. Good morning.
STEVE ZACK: Good morning.
HOBSON: So getting rid of the billable hour. This has come up before but is it for real this time?
ZACK: Well, it's not a matter of getting rid of the hourly bill because in some instances it makes sense, but it doesn't make sense in all instances and it's kind of become a Holy Grail of the profession that needs to be evaluated and that's what we're doing here. In a lot of instances really what should be billed for is the value received by the client.
HOBSON: So are the clients in favor of this idea?
ZACK: Very much. The clients and the lawyers recognize that we have to have a partnership when we represent a client and their interest and the lawyers interest have to be one in the same and that is to efficiently deliver legal services and provide value.
HOBSON: So lawyers aren't worried that this is going to mean less money coming in to them?
ZACK: Well, value billing doesn't mean less money. It could mean more money. If in fact you have a multimillion dollar lawsuit and you are able to resolve that lawsuit with one phone call let's say, aren't you happy to pay a value-related result as opposed to having to try the case for several years, pay those fees, and then on top of it have to pay the verdict.
HOBSON: But if you spend a lot of time working on a case that ends up not being such a great case and you've wasted a lot of time on it and don't get paid as much you would get less money in the pocket.
ZACK: That's part of it. It's got to be fair on both sides. And if not, there are folks that feel very comfortable that the hourly billing is working well for them and they're going to continue to use it. So we've got to find a way that lawyers are adequately compensated but more importantly that the client feels that they are getting what they're paying for.
HOBSON: Steve Zack, President of the American Bar Association. Thanks so much for your time this morning.
ZACK: Thank you so much.
When the scope of a legal matter is well defined, I give my clients the option of picking an hourly rate or a flat fee. They normally prefer a flat fee.
When the scope of the work to be done is not well defined, such as in litigation, an hourly rate works best. If the client pays a flat fee for litigation, the client will have no incentive to use the lawyer's time efficiently. For example, you can imagine how much fighting would occur in a divorce case if the clients had unlimited attorney hours for a flat fee.
