The Endangered Billable Hour

The popular law firm cheer, 'When I say "billable" you say "hour"' is being phased out for something a little more low key.  According to the Wall Street Journal, major companies such as Pfizer are doing away with the concept of paying law firms based on billable hours and opting instead for flat-fee agreements. 

In a tough economy, law firms are willing to work with general counsel of major companies to ensure steady workflow.  Likewise, in-house legal departments are willing to offer non-monetized incentives to attract quality outside counsel. 

Pfizer, Cisco Systems, and American Express have already implemented alternative billing plans.  They say that paying attorneys on an hourly basis promotes production but not necessarily collaboration and problem-solving.  Instead, they seek ways to reward solution-oriented legal work.  On the flip side, law firms can create efficiencies by working with several companies on targeted legal matters, increasing earning potential even with flat fee arrangements.

The switch from billable hours could affect law firm attorney salaries.  But, while firm lawyers' pockets may not be quite as lined as before, their calendars may open up a little.  It is no secret that billable hours often equate to long workdays and never-ending work weeks for firm attorneys.  A flat-fee model could give them access to a lifestyle more akin to that of their in-house counterparts, with somewhat-regular work hours and weekends off.

Whether billable hours are on their way out or are just taking a break remains to be seen.

But for now, welcome to the club, says in-house counsel. 

Related Resources:

• 'Billable Hour' Under Attack (Wall Street Journal)
• Pfizer Lawyers Switch Away From Billable Hours (Wall Street Journal video interview)