5 Questions You Should Ask Your Lawyer About Pricing
When you pay for legal services, you are, generally speaking, paying for your lawyer’s time. That is the product lawyers have to offer. Your lawyer spent years and thousands of dollars learning how to think the way they do. Now they use their time to put those skills to work for you and your case.
There are a few methods by which lawyers bill, each of which is intended to reimburse them for their time:
Contingency billing is where the lawyer gets a percentage of what you win in your case. The lawyer estimates the time needed to help you with your matter, what they think you’ll win, and then the percentage of those winnings they would need to appropriately compensate them for the time they spent.
In Flat-Rate billing, the lawyer may represent you in your whole matter for a flat rate, or they may offer to complete specific tasks in your matter, each at their own flat rate. Either way, the lawyer is estimating the time it will take to complete the case or task and then charging appropriately to compensate for that time.
Finally, there is hourly billing, where the attorney charges you for their actual time spent representing you on the matter.
Each of these methods has pros and cons (as well as a slew of legal and ethical restrictions). In contingency billing, the lawyer may receive a windfall if the settlement or judgment was much higher than expected. And, of course, the opposite could be true if they lose the case. In flat-rate billing, the lawyer might be incentivized to cut corners and get things done too quickly. Hopefully, a lawyer’s reputation and care for their clients will negate this. And flat-rate billing is often a breath of fresh air for clients because they know exactly what they’ll be paying.
While flat-rate billing is increasing in use and acceptance, for family law and probate, the hourly rate is still the staple. Hourly billing can be the most accurate measure of reimbursing a lawyer’s time, since it does not require estimates or predictions, but it can also, unfortunately, incentivize inefficiency and inaccuracy. Like the flat-rate issues, we hope that lawyers will be efficient and honest, incentivized by their reputations and their desire to truly help clients.
If your matter is being billed hourly, here are some things you should ask your lawyer about it:
1. Do you use timekeeping software?
Surprisingly, many lawyers do not use actual software to track their time. They simply estimate. Set a one-minute timer, place it on silent, and then close your eyes and count what you think is one minute. Check your accuracy against the actual timer. Were you right? Almost invariably the answer will be no. Now imagine you’re doing this with many minutes or even hours. You can see why time-keeping software is necessary.
2. Do you bill each item separately?
Many lawyers, regulation committees, and bar associations have appropriately ridiculed the use of “block billing.” This is where a lawyer lists several different, unrelated tasks in one billing entry on your bill. It could look something like “Drafted Response to Motion to Modify. Emailed client regarding extracurricular programs for child. Phone call to Opposing Counsel regarding upcoming Status Conference.” When lawyers do this, it is easy to hide or inappropriately state the amount of time something actually took them. Your bills should have each item listed separately.
3. Do you bill when two people in the firm do the same thing?
Some firms use two lawyers on each matter. The idea is that some lawyers have expertise in one area and can focus there, while others will be better equipped for other areas. In addition, this can help keep client costs down, because one lawyer may have a lower rate and can do much of the legwork on a matter. In theory, this is a great system. However, there are then opportunities for billing overlaps, e.g. two lawyers both read one email and bill for it. Ask your lawyer what their plan is for this. Sometimes an overlap will be necessary. Other times it won’t. When it’s necessary, some lawyers will use blended rates (meaning the average of both lawyers’ rates). Some will simply have clear guidelines for the division of labor. Whatever the policy, the most important thing is that they have at least discussed it and have a policy in place to ensure you are not being unnecessarily double billed.
4. What’s your rounding policy?
Lawyers billing hourly will almost always round to the nearest .1 of an hour. Lawyers who are thoughtful about their client’s financial needs should have a policy in place (or an automatic system, such as through their timekeeping software) to round these hours. Do they round to the nearest .1? The nearest .05? Do they always round up? Whatever the answer, they should at least have thought enough about it to know the answer.
5. How many billable hours do you require of your attorneys per month?
One of the biggest downfalls with hourly billing is that firms with associate lawyers tend to require so many billable hours that their lawyers may feel the need to find more work than is necessary. In other words, they might make up work--and bill you for it. Some of the larger, urban firms require their lawyers to get over 175 billable hours per month, which means over 8 hours of billable time per working day. Not all of a lawyer’s time is billable, and many would say only about 50-80% of a lawyer’s time is billable. This means that these big-firm lawyers have to either be working ridiculous hours or finding ways to add more “time” to their timesheets. What does your lawyer require of themselves or their associate lawyers? Do their requirements incentivize the lawyers to round up, add more time, burn themselves out?
As we’ve seen, there are pros and cons to each type of billing. The most important thing is having the tools to be able to evaluate your bill correctly.