During a brief spell working as a paralegal at Clyde & Co in 2006, I routinely billed the firm’s clients for the many hours I spent playing the game ‘Snake’ on my phone. No one seemed to notice.
Certainly, I never felt any urgency to get my work done quickly. Why would I? I was being billed out to clients at £100 an hour – the standard rate for a paralegal – and the more time I spent doing stuff, the more money the firm made. Looking back, it was easily the most inefficient work environment I’ve ever experienced. I dread to think what law firms are like now that there is Twitter…
Since the onset of the financial crisis in 2007, clients have increasingly been demanding alternatives to a billing system that has seen them ripped off by generations of slacker junior lawyers. But five years on the hourly rate remains by far the dominant method of law firms charging for their wares.
Finally, though, as the legal market faces its biggest squeeze yet – with the combined effect of the double dip recession and the Legal Services Act (LSA) forcing firms to take a hard look at themselves – it seems that we might be about to see some change.
Well, that’s what Lord Neuberger thinks. In a speech to the Association of Costs Lawyers, the Master of the Rolls said that the Alternative Business Structures (ABSs) ushered in by the LSA may “sound the death knell of hourly billing, as it will lead to more positive and market-orientated practices”. He added that businesses which base their charges on hourly billing “do not deserve to succeed” or even “survive”, before continuing:
“Hourly billing at best leads to inefficient practices, at worst it rewards and incentivises inefficiency. It also penalises the able, those with greater professional knowledge and skill. In other words, hourly billing fails to reward the diligent, the efficient and the able: its focus on the cost of time, a truly movable feast, simply does not reflect the value of work.”
Neuberger even went on to link hourly billing to a wider post-imperialist malaise affecting the UK as a whole:
“One of the main reasons for the decline of British industry between 1880 and 1980, and especially in the first half of the 20th century, was its charging system – that of cost plus – compared with its German and US competitors, who charged market value.”
As an alternative, he urged law firms to switch to a model “where skill and experience are the commodities which are sold.”
A new breed of law firm embodied by Riverview Law, the recently launched hybrid law firm-barristers’ chambers that works exclusively on a fixed fee basis, is hoping that Neuberger’s predictions will be proved right. Jeremy Hopkins, Riverview’s director of operations, believes that Neuberger “has picked up on the fact that the structure and culture of law firms is inward looking, rather than being about finding the right outcome for the client.”
Hopkins says Riverview’s only fear is that the “traditional conservatism” of the legal profession will see clients continue to tolerate the status quo, but he reckons that the climate is ripe for change. “My sense is that the current billing model cannot carry on,” Hopkins continues. He adds that Riverview will be looking at taking on graduate recruits in the relatively near future, with the firm keeping a close eye on the ongoing Legal Education and Training Review (LETR).