Salaried lawyers and billable hours: a new perspective from the sociology of work

Abstract

The work of legal professionals is changing rapidly, but the changes have not yet been thoroughly investigated from the perspective of the sociology of work. This paper draws on a research project that examined the work of solicitors in private practice in Melbourne, Australia. It uses in-depth interviews, results of secondary surveys and other data sources in order to describe the dominant working-time patterns. The evidence points to a common pattern of rigid and demanding schedules, which can be traced back to the indirect pressures exerted by the widespread system of ‘billable hours’. The paper takes up the challenge to examine the operation of this system. We argue that the billable hours system, initially just a technique for billing clients, has been transformed into a tool for measuring and controlling the work of salaried solicitors, through setting of targets, close time recording, careful monitoring, and a supple set of sanctions.

Acknowledgements

The research for this paper was supported by funding under the Australian Research Council's Discovery Projects scheme (DP 0449771). We would like to thank the interviewees who generously gave their time and Jenny Malone and Estelle Tang who conducted the majority of the interviews. Thanks also to the Victorian Women Lawyers, Elizabeth Hayes and other members of the Part-time Lawyers Network, Darren Hoogenboom from the Law Institute of Victoria, Linda White and Edgar Burns. Thanks to Beth Gaze, Alex Heron, Estelle Tang, Susie Elliott and Georgina Murray who read and criticised earlier drafts. Finally, thanks to the four referees of the International Journal of the Legal Profession, who provided many useful comments on the penultimate draft.

Notes

In the current ABS classification of occupations, ‘solicitors’ (ANZSCO 2713) are defined as persons who “provide legal advice, prepare and draft documents, and conduct negotiations on behalf of clients on matters associated with the law” (ABS, 2005).

An award is a legally binding document, set down by permanent, independent quasi-judicial tribunals, which defines minimum rates of pay and conditions of employment for employees within particular industries or occupations. We can note here that the Australian labour regulation system in general is particularly weak in relation to protection around standard hours and overtime. Many of the crucial elements found in other regulatory systems, such as maximum daily hours, maximum weekly limits and maximum overtime limits are absent (Campbell, 2007, pp. 51–7; McCann, 2005). The National Employment Standards, which define the set of statutory minima in the Fair Work Act 2009, include a provision for a ‘maximum’ 38-hour week, but this does not represent in any real sense a maximum since it allows for employers to demand ‘reasonable’ extra hours and since it can be extensively averaged (Murray & Owens, 2009; Creighton & Stewart, 2010, pp. 244–6). Nevertheless, the 38-hour week does function in Australia as a loose regulatory and normative standard (Creighton & Stewart, 2010, p. 378), allowing solicitors to see their working hours as composed of standard hours plus extra hours of ‘unpaid’ overtime and to compare themselves with other occupations.

Direct pressure may be uncommon, but it is not completely unknown. Salaried solicitors in one Melbourne law firm complained of email injunctions “telling lawyers they had to be at their desks from 8 am to 6.30 pm regardless of current work requirements and family responsibilities” (LIV & VWL, 2006, p. 38). Similarly, one interviewee (Fran) complained of being allowed to venture out to lunch only during a prescribed one-hour period.

A Canadian survey in 1994 asked lawyers about their autonomy, largely defined in terms of task-level autonomy. The results indicated a significantly lower sense of autonomy amongst salaried lawyers (‘associates’) in law firms, compared to both law firm partners and solo practitioners (Wallace & Kay, 2008, pp. 1024, 1037–8).

Some authors contend that professional autonomy, in the sense of the traditional control of professionals over their own work and their own practices, persists in modern law firms, as one component in the persistence of professionalism as a whole. The evidence for this idea, however, seems to be drawn from descriptions of the work patterns of partners (Faulconbridge & Muzio, 2007, pp. 258–60). Similarly, Muzio and Ackroyd (2005, p. 620) suggest that ‘professional control’ remains in place because the group that directs the legal labour process, including the work of salaried lawyers, is itself part of the profession – the ‘professional elite’. This argument seems to go back to Freidson (1984, p. 12), who concedes the subordination and limited autonomy of salaried professionals, but argues that the limited discretion and judgment of individual rank-and-file professional workers does not represent a reduction in the control of professional work by the profession itself, since the employers are themselves professional workers (‘superordinate colleagues’) who design the jobs and then supervise and manage the rank-and-file workers. This argument clearly puts the cart before the horse; it takes the existence of a ‘profession’ with a generalised capacity for action as a foundation premise of the theory instead of as a proposition to be tested through empirical study.

The conveyancing scale, which provided a solid base for the income of many Australian firms, disappeared in the Australian Capital Territory after 1974 (Nieuwenhuysen & Williams-Wynn, 1982), and then from the other states and territories in the 1980s and 1990s. Other legal services were also governed by scales, fixed by the state professional associations. The abolition of the scales system in New South Wales has been dated to as late as 1994, when state legislation released practitioners from the ‘price fixing’ limitations of the scales, replacing these with an emphasis on disclosure and ‘costs agreements’ (Legal Fees Review Panel, 2004, pp. 4–5, 23). As well as billing systems based on scales or tariffs, Australian law firms in the past also relied on versions of ‘value billing’. One solicitor with lengthy experience in law firms suggested that, in the period before billable hours, senior partners had become skilled at charging clients according to the bulk of the file: “once they got to the end of the file they'd literally hold it in their hand and sort of weigh it” (Phillip).

One common criticism of billable hours is that they provide a poor measure of the value of the work to the client or indeed to the salaried solicitor (ABA, 2002). This criticism may be true. At the same time – assuming the billable hours count can be realised in the client's fee – they provide an excellent measure of the value of the solicitor's work to the owners of the firm. The latter point of view has proven to be the more important one. From the employer's perspective, interested in financial health and profit, the product of the law firm is more accurately described in terms of billable hours rather than in terms of legal services.

Law firms remain labour-intensive operations, heavily dependent on the efforts of salaried professionals. This situation is fraught with difficulties because of the uncertainty of such work, which goes beyond the fundamental indeterminacy noted by Braverman (1974). In his classic participant observation study of a corporate law firm in Chicago, Flood (1991) stresses the uncertainty of deal-making and the complex interactive nature of much work by corporate lawyers, centred on advising, negotiating and drafting documents. He suggests that this uncertainty, anchored in the nature of the relation between lawyer and client, is in turn compounded by the internal politics of law firms, which add complex relations between superiors and subordinates (Flood, 1991, p. 68). Similarly, Gorman (2006) distinguishes three phases in lawyers' work, each of which is characterised by uncertainty: information gathering; inferential reasoning and judgment; and strategy implementation.

We refer here to targets for ‘billable hours’, but these can be expressed in different units of measurement. They may be calculated in hours or in ‘units’ (the six-minute units mentioned above). In some firms targets for ‘billable hours’ are joined with, or even displaced by, targets for a ‘budget’, where the latter is a somewhat more precise measure of the contribution of the solicitor to income and profit couched in terms of dollars and generally measured over a longer time-scale such as a year.

A US survey in 2005 suggested that around 86 percent of ‘supervised attorneys’ in law firms with more than 10 attorneys worked with a minimum billable hours requirement [Fortney, 2005; see the higher proportion cited in ABA (2002, p. 43)].

In the case of full-time workers, we can extrapolate the daily target to an annual target. If we assume six billable hours per day over a year of 230 working days, that is Monday to Friday each week with four weeks' annual leave and 10 days of public holidays, then this amounts to a target of 1,380 billable hours per annum (see also Parker & Ruschena, 2012). If we assume seven billable hours per day, this amounts to a minimum 1,610 billable hours per annum, closer but still apparently short of the US targets. A 1998 text suggests that average billable hours for employee solicitors in Australia range from 700 to 1,750 hours per annum (Balls, 1998, p. 51).

Several scholars note that the level has been ratcheted up since the early days of the billable hours system, when the American Bar Association (ABA) spoke of a ‘reasonable’ workload for a full-time job of around approximately 1,300 fee-earning hours per year (Schiltz, 1999, pp. 891–2; Kuckes, 2002; Fortney, 2005, pp. 178–9; Bruck & Canter, 2008, pp. 2095–6, 2100). Cantor (1964, pp. 951–2) reports on surveys that showed a median of 1,236 billable hours in Oregon and about the same in New York State in the early 1960s, but by 1978 similar surveys revealed median reported billable hours of around 1,600 per annum (Darby, 1978). Michael Trotter (1993), reviewing his career as a lawyer in Atlanta, pointed out that he billed approximately 1,100 hours in 1965, in one of his first years in practice, but a young lawyer in the early 1990s would be expected to bill 1,900 hours or more. Turow (2007) suggests that in the large Chicago firms, the expectation has risen from 1,750–1,800 hours per annum in 1986 to 2,000–2,100 hours 20 years later. Spangler's study of five New England regional law firms in the early 1980s paints a picture of what could be judged now as rather loose controls, in which timekeeping was in 15-minute blocks, this timekeeping was not always adhered to, and only three out of five firms had billable hours quotas for associates (set at 1,700–1,800 hours per annum) (Spangler, 1986, pp. 52–3). There are, of course, human limits to long hours, and it is unlikely that this trajectory of increase can be sustained for much longer. Where the limit is situated is a separate question. Lerman (2002, pp. 905–6, 918) notes the intriguing case of James Spiotto, a senior partner at a large Chicago law firm, who achieved fame for billing over 6,000 hours per year for four years running in the 1990s. This feat required, as Spiotto explained to the press, working every day in the year without a day off, generally from five or six in the morning to 11 or 12 at night but with some 52 even tougher days of all-day and all-night effort. This was widely regarded as impossible; indeed, even 2,300 hours per year are sometimes regarded as outside the boundary of honest billing (Lerman, 2002, p. 885).

Falling short of a target for billable hours need not lead automatically to penalties. Several partners and managers whom we interviewed insisted that such a shortfall would just signal a problem that needed to be investigated; it would simply “raise a flag” (Nicholas). It might not indicate underperformance on the part of an individual solicitor but might be due to numerous other factors: s/he may not have been allocated enough work (for varied reasons), s/he may have been busy with other legitimate activities, s/he may not have accurately captured the billable hours in a time sheets, s/he may have been on leave during the relevant period, or s/he may have had personal problems that led to a temporary distraction. This draws attention to the fact that billable hours' targets are one element of a broader system of allocating tasks, monitoring effort and evaluating performance.

Surveys of lawyers suggest that ‘unethical billing’ linked to the billable hours system may be widespread in large firms in the US (Ross, 1991; see also Fortney, 2000; Lerman, 1999). A survey that reproduced much of Fortney's schedule and that included similar questions on unethical billing was run in Australia, in the state of Queensland, in 2010. Just short of a quarter of the respondents suggested that they had observed instances of padding bills for work not actually performed (Parker & Ruschena, 2012, p. 641). Unfortunately, much of the discussion associated with such surveys fails to adequately distinguish between partners and associates, and it is difficult to assess the way in which and the extent to which salaried lawyers participate in such practices.

The calculation can be delicate, given that demand for legal services fluctuates and that it may be hard to estimate the precise amount of work. Firms often seek to adjust their staffing according to the troughs in commissioned work, confident in the expectation that lawyers will be able to respond with extra effort to match any peaks, for example by pulling ‘all-nighters’.

Some US commentators suggest that salary rises have caused the increases in billable hours' targets (ABA, 2002, p. 3; Fortney, 2003, pp. 305–6). This is a curious argument that seems to depend on the rather implausible idea that labour markets for solicitors are in such shortage that firms are forced to succumb to individual demands for high salaries. We are more convinced by the argument that high targets come first and high salaries follow. Of course, salary pressures can still be important, especially where young lawyers are grappling with substantial debts as a result of their studies, but, as in most labour markets, the decisive power resides with the firms. This is all the more true given the regular renewal of the supply of clever and educated law school graduates.

In Galanter and Palay's model (1991), the long hours of salaried solicitors could be explained by the pressure exerted by the competition for partnership. This explanation stresses the pivotal role of management, who set up the tournament, and in this sense it shares some parallels with our own argument. However, we see no evidence that the competition for partnership exerts the decisive influence [see also the new model of the “elastic tournament” offered by Galanter and Henderson (2008)]. In our judgment, long hours are better explained by reference to the pressure exerted by the system of billable hours, centred on high (and increasing) targets imposed by law firm managers on salaried solicitors. Similar objections apply to the economic model proposed by Landers et al. (1996), which assumes that equity partners in law firms value in their subordinates a willingness to work hard and that they use billable hours as a proxy measure for this ‘unobservable’ trait, even though it leads to ‘inefficient’ levels of long working hours. We suggest, on the contrary, that the trait valued by equity partners in law firms is the ability to generate a large number of billable hours, that measurement of billable hours is straightforward, and that the resulting level of long working hours worked by salaried solicitors – though it may contain elements of slack and poor work – is best seen as efficient from the employer point of view.

It is reminiscent of the argument advanced in opposition to the campaign for a Ten Hour Day in England in the 1830s and 1840s, when some apologists for the factory owners argued that restricting daily hours to 10 would eliminate the owners' profit, which was concentrated in the last hour or two of the day (Marx, 1976, pp. 333–8).

It is hard to get good figures for the rate of attrition from private practices in Australia, but it seems high. A 2006 report speaks of “churn” rates in law firms of 20–40 percent per annum, which equates to a “complete renewal of a firm's workforce around every five years or so” (LIV & VWL, 2006, p. 3; see also IBISWorld, 2007, p. 45).

Lee refers to the ambiguous structure of the large law firm, which “adopts the body of a partnership but with the mind of a corporation” (1992, p. 38; see also Regan, 2008, p. 92). The partnership structure undoubtedly affects some aspects of the operation of large law firms, e.g. in giving prominence to new metrics such as ‘profits per partner’ or perhaps more exactly, ‘profits per equity partner’ (Lee, 1992; Faulconbridge & Muzio, 2009). Similarly, the specific way of dividing the pie amongst partners may have consequences for the stability of firms (Gilson & Mnookin, 1985). However, neither point substantially qualifies the basic dynamic of profit maximisation, which acts as the decisive factor in shaping the organisation of work for salaried solicitors.