Law firm rates across the U.S. are keeping pace with the rise in the cost of living, reaching an average of $245 per hour in 2018.
But billing rates for nonlawyers in firms are stagnant, according to a new study from Clio, a Canadian company that provides cloud-based practice management for firms.
The company used aggregated and anonymized data from nearly 70,000 legal professionals to construct its Billable Hour Index. If law firm rates had grown at the same clip as the Consumer Price Index from 2010 to February 2018, they would now be at $250 per hour.
Lawyers in firms saw their rates slightly surpass the CPI, growing to $267 per hour. But the story for nonlawyers who bill at hourly rates was different. That average rate started at above $150 per hour in 2010, then rose slightly before sinking below $150. Nonlawyers now earn, on average, $143 per hour, a figure that has been essentially stagnant since the middle of 2011.
The Clio report also acknowledged the ubiquity of discounted rates, noting that 36 percent of firms reported always or often discounting rates, while another 38 percent reported doing so sometimes. By far, the most common reason for offering a discount was empathy for clients, according to 71 percent of firms that give breaks on rates. The client’s ability to pay was also a consideration, for 59 percent of those firms. And 44 percent of these firms reported offering discounts out of concerns that too much time was tracked.
The order of average billing rates in 10 large metropolitan areas were shuffled since the 2017 report. New York City and Los Angeles remained the two most expensive cities, at $368 per hour and $346, respectively. But Washington, D.C., at $327, leapfrogged both Chicago and Miami to rank third. At $312, Chicago fell from third to fourth. Fifth-place Atlanta, at $305, and sixth-place Dallas, at $302, both passed Miami, which saw rates drop from $310 to $297. Boston, at $288, Houston, at $278, and Philadelphia, at $269, rounded out the list.
The study also broke down the most lucrative practice areas by rates. Firms charged most for intellectual property work, at $317 an hour, followed by bankruptcy at $305, corporate work at $295, mediation and arbitration at $289, and labor and employment at $285.
The order at the top was reversed for lawyers alone, who billed an average of $335 for bankruptcy and $327 for IP.
But much more of the IP work made it onto final invoices, with 86 percent being realized, compared with 74 percent for bankruptcy. The rate of collection was higher too, at 92 percent, compared with 71 percent. This translated into law firms charging an effective rate of $258/hour for IP, compared with $176 for bankruptcy.
As in 2017, the study also found that lawyers were using their time inefficiently, putting an average of only 2.4 hours a day into billable tasks. That’s little different from the 2.3 hour average from the previous year.
This is the third year of Clio’s Legal Trends Report.