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Firms’ budgets behind billing fraud

Firms’ budgets behind billing fraud

LAW FIRMS’ expectations of the number of chargeable hours their lawyers should work has seen a “huge growth”, Lawyers Weekly has learned, and this is occurring at most levels and at…

LAW FIRMS’ expectations of the number of chargeable hours their lawyers should work has seen a “huge growth”, Lawyers Weekly has learned, and this is occurring at most levels and at most firms.

Law firm strategic practice development company Julian Midwinter and Associates said that a periodic study of working hours, file loads, time and recording policies and budget requirements in a variety of law firms reveals that “the majority of law firms now expect a lot more chargeable hours from their people than they have in the past”.

“The budgets are getting to be huge and arguably too big for ordinary, talented, hard-working people to ever perform to,” said Linda Julian, non-executive director at Julian Midwinter and Associates. “Our research is quite clear on this.”

Julian said there are examples of well known first, second and third-tier firms, whose budget expectations of partners work out to be nine or ten chargeable hours per working day. “This is at the extreme end,” said Julian, and is expected primarily of partners.

The chargeable hour expectations are so high in some cases that it is hard to believe they are actually being achieved, said Julian. She argued that either lawyers and partners are “padding” out their time sheets, or they are actually working over 15 hour days.

“But we see top-tier firms in Australia and New Zealand whose chargeable hour expectations of partners are eight hours a day. And when you add to [that] time spent supervising staff, time mentoring and developing staff, time participating in the management of the firm, and time spent developing clients … I just don’t know whether these people are really working the 15 or 16 hours a day it would probably take to deliver all of that to all of those people, or whether there is time sheet padding or other things going on,” she said.

There are many examples of firms expecting too much of their lawyers and non-equity partners in particular, said Julian. “We have been shocked and amazed by some of the time recording policies and practices and requirements of many, many firms.

Julian said that some firms’ charging policies and practices are “creating a situation where to actually meet the firm’s requirements, people are going to have to produce fraudulent time sheets”.

“Now, does a law firm actually set out to have its lawyers produce fraudulent time sheets? I am sure they do not. But the effect of their expectations, both stated and unstated, is that many lawyers meet the expectations by doing this — too many lawyers. It goes on, and it doesn’t just happen sometimes,” she said.

Lawyers Weekly has over the past few months revealed that many lawyers are unhappy, overworked, depressed, and are unable to search for new roles for fear of the “rumour mill” in job-hunting circles.

In an article published two weeks ago, an anonymous source said law is far from the glamorous profession you see in ‘LA Law’. “We’re service people — we put out fires for clients, we rescue cats out of trees for clients, we shovel shit for clients. It’s really not that glamorous, other than the fact that you use a pen and paper instead of a shovel,” he said.

Julian Midwinter and Associates’ Julian said she meets “very few lawyers” in their forties and above “who actually like, let alone love, the work they do”.

While many do have a passion for what they do, “the proportion is not high”, said Julian. “And that is a sad thing for the profession, a sad thing for the community and mostly it is a sad thing for the professionals concerned.” Many people she classified as “borderline burnout”, who are “people who are just not enthusiastic, not passionate about what they are doing”.

Raj Lawyers earlier this year adopted a holistic approach to providing certainty of fees to avoid the problem of overcharging. managing partner Niren Raj said. The firm’s practice management systems were brought in three yeas ago with a view to introducing event costing. “We had made up our minds that what the legal fraternity needed to do was give greater certainty to its client base on what it would cost for any action they consulted their lawyers on,” Raj said. In May last year the firm engaged an independent consultant to review the cost of every matter that went through the firm.

New South Wales Bar Association president Bret Walker SC recently argued that Australian newspapers have started to report and discuss the performance of aspiring middle-sized law firms, and that “virtually the only yardstick of performance, equated to professional quality, and thus held out to new recruits including the brightest and best, is money”.

“Very occasionally, the money won for the client; never the money saved by the client, nor the value bought by the clients’ money. Mostly just the money received by the firm, the revenue. To rub it in, the figures are presented and re-presented to drive a message home. Whether it is the journalists or the firms who want the message sent is difficult to say — but one rarely reads of disclaimers or resistance by the firms with the glittering figures.

“What is the message? That money defines the most desirable professional attainments in private practice: see the number of leveraged fee-earners per equity partner; the revenue per head of professional staff; the margins between revenue and costs; and especially the profit per partner. Business clients presumably put up with this perverse publicity on the part of their chosen lawyers, because imitation is understood to be the sincerest form of flattery,” said Walker.

But it is time to question that if money is the measure, he said, “who would dare say that money for the lawyers is more important than money saved by the clients?”

Law firms should re-examine the expectations they have for charging clients, and find a renewed focus for the way they conduct their businesses, suggested Julian. “It pays for firms to look hard at their budgets and get reasonable about them. In my opinion, there are not very many firms who can depend on getting six and a half or so chargeable hours unless they are either overworking the lawyers or overcharging the client.”

“A chargeable hour is not an hour in which five minutes is spent getting coffee, or five minutes going to the toilet, or five minute attending personal or other firm business on the phone, or another five minutes doing administrative work.

“When you see firms whose policy it is that early and mid career lawyers will produce seven and a half chargeable hours a day, by the time we allow for those people’s participation in professional developments, in any form of client-related development, in any form of delivery of client service, or their own performance appraisal, and any biological requirements that people have, they are having to work over 10 hours a day.”

Part-time practise makes mockery of time-sheets

IT IS THE practice in some Australian law firms to provide lawyers and partners with the option of part-time work. But, despite well-meaning intentions, in some cases this can create the negative result that all hours worked are considered chargeable.

This creates a system in which either the lawyer is overworked, or the client is overcharged, said Linda Julian of Julian Midwinter. Some lawyers working part time are “confined purely to chargeable work”, she said, “and that which is not chargeable is not considered a working hour”.

This has two ramifications for the working lawyer, said Julian. Firstly, it is possible that the lawyer charges for all hours worked, in which case the client is paying for them to have a coffee or go to the bathroom. “In this instance, [the cost] tends to transfer to the client, which is unfair. When they are paying $500 or $600 an hour, forget it! They don’t want to pay for that,” she said.

Otherwise, Julian suggested, the lawyer is working much longer hours, including administration and time spent building client relationships, for which they cannot charge and so do not get paid.

Law firms should remedy this problem when it is occurring, said Julian. “It pays to be realistic about your time recording, it pays to encourage people to be scrupulously honest about how much time was taken, but more importantly, how long it should have taken an efficient person to complete a task,” she said.

“It pays for firms to look hard at their budgets and get reasonable about them. In my opinion, there are not very many firms who can depend on getting six and a half or so chargeable hours unless they are either overworking the lawyers or overcharging the client.”

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