Lawyer Salaries have Breached the $1,000 per Hour Mark

Oil prices have skyrocketed and my gas is well over $4 a gallon again.  And apparently food prices have hit an all-time global high (even though all my aunties say I’ve put on some weight).  What’s going on here?  What else is on the list of expensive items these days?

Well, don’t act so surprised, but lawyer salaries have also reached an all-time high.  According to reports, some lawyers are billing over $1000 an hour (that’s just over $2 million a year).  This is major news for the legal field, since charging more than $1000 an hour has previously been somewhat of a social taboo.  Many corporate clients would even go so far as to bill only $995, just to make sure that they don’t commit a billing blunder in the eyes of the legal world.

Now, we’ve blogged about lawyer stats and salaries before, but none of the average rates for attorneys even came close to $1K/hr.  So why the new standards for star lawyers and law firms?  Basically, as you would expect, it takes two to tango in any type of billing situation.  The client has to agree to a lawyer fee of over $1,000 in the first place.

While many companies have reduced their legal budgets, some of them are willing to pay a premium price for legal services, especially in situations where the stakes are high.  Many clients also feel that hiring a star attorney will help to resolve their legal conflict more efficiently, as some outstanding litigators do comprise a unique breed of expertise. This is the equivalent of hiring a Kobe Bryant, Esq. to get the job done rather than a rookie fresh out of the law school draft.

And what types of legal services demand such hefty bills?  As you can expect, most of the “$1000/hr plus club” is occupied by attorneys who deal with- what else- money.  The most expensive lawyer salaries are connected with such fields as corporate mergers and acquisitions, finance and tax issues, and, of all things, bankruptcy claims (apparently, the money is where the money isn’t).

But are such exorbitant prices worth it?  Many critics feel that these types of rates will only serve to contribute to inflation in the legal industry.  Several law firms are still struggling to finance pay packages that they had awarded their star attorneys in the past.  In my own opinion, $1000 an hour is indeed a lot to pay for any type of service, regardless of what it is.

But to me any type of lawyer fee arrangement is basically a contract, and the parties should be free to contract for whatever prices that they feel are necessary.  So if they feel that spending $1,000 an hour on attorney services is necessary, then under their particular circumstances, it probably is.  Bear in mind that fees above $1000 per hour are still the exception rather than the norm; most clients who pay this type of money are corporate giants who may have a huge amount at stake (say, for example, the survival of a multi-billion dollar corporation).

Now, how is this going to affect the legal field as we know it?  This is what interests me the most about this new development.  It appears that fees for your typical, day-to-day legal services such as criminal representation, family law matters, and limited civil claims won’t really be affected.  What we’re talking about here is really that small slice of the population that needs star attorneys- large corporations, key international figures, and probably celebrities.

So of course the going rate for typical legal fees won’t reach $1,000/hour in general.  But what could happen here is that the new hole in the salary ceiling could affect the way that some law firms are structured.  If you’ve read any of the surrounding literature on the $1000 an hour club, you may notice that something is missing from the discussion- the subject of outsourcing lawyers and legal work to other countries.

As you may have already read here on our blog, outsourcing has also touched the legal industry, and many legal tasks such as document review are being sent by U.S. firms to countries like India and Korea.  Before the advent of outsourcing, a firm that made a huge payout to a star lawyer often recouped their costs by channeling work to less expensive employees such as junior associates or regular associates.  It’s as if the star attorney serves as the face of the firm, with the grunt work being done by others who can work for cheaper.

Now, factor in outsourcing, and this all makes a bit more sense.  To me it’s no coincidence that higher lawyer fees have appeared on the scene at about the same time that legal outsourcing is gaining popularity.  There may be a definite link between salary hikes and legal process outsourcing, which may be a way for larger firms to recover even more of the expenses associated with their star lawyers.

So before, the traditional law firm was structured mainly around the partners and associates.  You had a neat distribution of tasks between the partners and associates, and a further sub-delegation of administrative tasks to secretaries and paralegals, etc.  Currently, another layer has been created at the very top, reserved for “super attorneys” and star lawyers.  Meanwhile the bottom or outer layer of work is being shipped out more and more through outsourcing, which can be even cheaper than paying a junior associate.

Do you know what this reminds me of?  One of those fast-food burgers that doesn’t have any buns.  The “buns” have been outsourced, and now you’ve got to hold your greasy “sandwich” between some pretty expensive slices of bacon.

Got the picture?  And the funny thing is, some people think that bun-less burgers are also worth the price.  (Note: I don’t eat those things, but all these references to food could be a sign that my aunties are correct.)

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