Does Overworking Lawyers Encourage Fraud?

There are a lot of widespread perceptions about the legal profession. One of the most common one is that lawyers, especially new associates at law firms, are overworked.

The main reason for this, besides the fact that the practice of law is inherently time-consuming, is the fact that many law firms revolve around the “billable hour.” Many law firms bill their clients by the hour, and they’ll bill a client for any and all work done by the firm’s associates on the client’s case. Work that can be billed to a client is measured in billable hours.

Since this is the primary source of a firm’s income, many law firms require their associates to work a minimum number of billable hours, or “billables,” per year. A typical requirement at a firm is about 2,000 billable hours per year. This amounts to 8 hours a day, 5 days a week, with two weeks per year of vacation.

However, not all the work done by lawyers can be billed, so while a 2,000 hour per year requirement seems reasonable (it amounts to a standard work week), it usually means that a lawyer will have to work many more hours per week to meet his or her billable requirements.

One firm has taken this requirement to seemingly-new heights. A firm in Southern California required its associate attorneys to bill 3,000 hours per year. This amounts to working 8 hours per day, 7 days per week, every week of the year. Taking into account the fact that not every hour a lawyer works is going to be billable, you can see how such a requirement is completely unrealistic. And with the job market for new lawyers being what it is, it’s easy to imagine the desperate measures a young associate might take to meet this requirement.

The story linked above discusses a lawyer who was fired from the firm with the 3,000 billable hour requirement who is now suing his former employers, alleging that this requirement encouraged associates to forge their timesheets, effectively committing billing fraud against their clients.

In order to avoid losing their job, the former law firm employee alleges in his lawsuit that associates routinely falsified their timesheets, where they keep track of their billable hours. Generally, law firms bill in 0.1 hour (or 6-minute) increments. Associates would bill one such unit for opening an email, another for reading it, and yet another for responding it, even if all these things took far less than the time being billed for.

Now, I’m not saying it’s impossible to honestly bill 3,000 hours per year, assuming a law office actually has enough work for its associates to fill that time. Obviously, meeting that quota without padding one’s timesheets would require a great deal of discipline, and a pretty miserable work-life balance, but it could probably be done.

However, people being the way that they are, it seems far more likely that an associate would pad his or her bills.

So, what could be done about this? Obviously, it’s up to law firm management to make it perfectly clear to its associates that billing fraud will not be tolerated, and foster a workplace culture that values honesty and ethics over billing.

This should probably be coupled with reasonable and slightly more flexible billable hour requirements.

Or, perhaps some firms should rethink the billable hour system altogether. I’ve written before about how the legal industry appears to be changing. With clients becoming more budget-conscious, especially when it comes to the price of legal services, some law firms are starting to charge flat fees for certain services, rather than billing by the hour.

In theory, this structure eliminates any incentive for lawyers to drag their feet on simple projects, simply to run up their billables, since they’re getting paid for the end result of their work, rather than the amount of time they spend on it. If a large number of legal services could be billed for in such a way, it may well result in better-quality work product, produced much more efficiently, while discouraging billing fraud.

Obviously, the billable hour is not going away entirely any time soon. Sometimes, it can’t be known in advance how complicated or time-consuming a legal task is going to be before work starts on it, it makes sense to charge by the hour, assuming the lawyer bills honestly. However, humans have an extraordinary capacity to expand any task assigned to them to fill the time allotted. If someone can do a task in a day, but they’re given a week in which to do it, you can bet that most people will simply make the task take a week. In a culture that appears to value the amount of time spent on a task at least as much as the level of quality, you can see how some law firms end up operating somewhat inefficiently.

There’s no perfect solution to this. However, I think it’s important for lawyers (as well as state bar associations) to remember that a lawyer’s most important obligation to his or her client is to provide competent legal representation, at a reasonable fee. If a firm requires its lawyers to bill an insane number of hours each year, it may be worth looking into whether such a requirement is compatible with either of those primary obligations.