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Billable hours place profession under threat

Time-sheet forgery is running rife in the legal profession due to the billable hour, Western Australia's Chief Justice Wayne Martin has declared, and it's time the regulators stepped in to do something about it.

Speaking on Monday at the Perth Press Club for the launch of Law Week 2010, Justice Martin said time billing is not only building distrust and dislike for lawyers from the general community, but also playing havoc on the job satisfaction levels of lawyers, and threatening the profession as a whole.

"The legal profession, and the bodies responsible for the regulation of that profession, should act to diminish the dominance of time billing if they are to avoid consumer dissatisfaction with providers of legal services to rise to levels where other alternatives to those services are sought," Justice Martin said.

Outlining one of the many disadvantages of time billing, Justice Martin said with the performance of every lawyer in a firm judged on the billable hours they produce, there is a strong incentive for lawyers to "pad their time-sheets".

"Clients may be charged for the lawyer thinking about their case while driving to work, or showering, or shaving," he said. "Time spent by the lawyer familiarising himself or herself with a general area of law may be charged to a client, when really that time is part of the lawyer's continuing professional development of skills acquisition." Such "padding" of timesheets also distorts the true performance assessment of lawyers in their firms, and may encourage competition from lawyers in the same firm to out-perform each other on billable hours.

Time billing is also largely responsible for the high level of young lawyer complaints regarding the unsatisfying nature of legal work, said Justice Martin. "Clever young lawyers are leaving the profession in droves, or shifting to corporate, government and NGO roles where their motivation is provided, and their performance assessed by outcomes other than the production of billable hours," he said.

And while Justice Martin did acknowledge that time billing does have its advantages - like that it's easy and efficient, ensures a relationship between costs facing the firm and the price given to clients (in theory), can offer a price comparison and can avoid risk associated with fixed fees - he noted numerous more disadvantages associated with the common pricing practice.

Declaring that such disadvantages are "so many that it is difficult to know where to start" Justice Martin offered a list that highlighted the inherent conflict of interest that occurs between achieving a resolution for clients and ensuring the profitability of a firm in a matter. He also noted that clients are forced to bear all the risk under time billing practices, that no realistic upfront price can be offered to clients, and also that it fosters a mentality of production which "discourages efficiency or innovation because the lawyers' bills, and profit, would be reduced by the development of efficiencies".

Further, Justice Martin added that time billing encourages "over-servicing" across the industry. "Four lawyers might attend a meeting where one would do," he said. "Teams of lawyers go to court, some just sitting and watching." And a lack of encouragement for project management and/or case planning also adds to the toxicity of time billing, added Justice Martin, while the legal sector has failed to fully realise the necessity for cost benefit analysis, technology advance, high-levels of client lawyer communication and true transparency of costs - due to the influence of the billable hour.

Justice Martin also recommended a number of alternatives to time billing - especially those that highlight a renewed focus on client value, service and satisfaction. He talked up the advantages firms in the UK are receiving by deploying specialist external training for lawyers in project management, as well as the potential for law firms and clients alike in moving towards event billing, fixed fees, blended billing rates, contingency fees and hybrid methods - which deploy a variety of billing methods, including billable hour.

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