(photo via iStock)
Law firms have been calling for the end of the billable hour for decades. And since the 2008 recession, they have increasingly offered cost-conscious clients alternative fee arrangements.
Now Jackson Lewis says it wants to take the next step in the evolutionary process of alternative fee arrangements by eliminating the billable hour as an evaluative tool for its 293 associates. As of Jan. 1, associates at the labor and employment firm will be assessed on efficiency, client service, responsiveness, team orientation and pro bono commitment in an effort to align the way Jackson Lewis “deliver[s] legal services with clients’ needs,” according to firm chair Vincent Cino. (The firm’s compensation model for partners is based on revenue rather than hours.)
“The billable hour is directly opposed to the best interest of the client and to the provider of service because by its very nature it adds an artificial barrier to the accomplishment of the only real objective, which is a quality legal product for a set and expected price,” Cino says.
Eliminating billable hours for associates, however, may not make much of a difference for Jackson Lewis’ clients, at least in terms of how much they must pay for the firm’s legal services. For instance, Jackson Lewis has had a flat fee arrangement—no billable hours or flat per-matter fees—with Pfizer since January 2008, so the firm’s new associate review process doesn’t directly affect Pfizer’s bill.
“We encourage them as a firm to be as efficient as possible. How they choose to do that is the firm’s decision,” says Margaret Madden, vice president and assistant general counsel of Pfizer.
Big Law has questioned the merits of the billable hour for years. Evan Chesler, chair of Cravath, Swaine & Moore, penned an op-ed piece for Forbes Magazine in 2009 that advocated killing it. “The billable hour makes no sense, not even for lawyers,” he wrote. “If you are successful and win a case early on, you put yourself out of work. If you get bogged down in a land war in Asia, you make more money. That is frankly nuts.”
Reached by The Am Law Daily for perspective on its current views on the billable hour, Cravath declined to comment.
A few years ago, Jackson Lewis based its associate productivity bonuses on the numbers of hours worked. Those who didn’t reach the required 1,900 billable hours per year weren’t eligible, which incentivized them to log long hours, Cino says. The new initiative to increase efficiency—which will be discussed at the equity partners meeting this weekend and introduced to associates in three weeks—will evaluate associates’ contribution and productivity on subjective factors compiled by their managers. “True billed value” will be the only financial metric considered, Cino adds.
Eric Magnus, a wage and hour class action attorney in Jackson Lewis’ Atlanta office who was promoted to nonequity partner earlier this year, says the firm’s annual evaluation process has always been “comprehensive.”
“It isn’t just based on hard numbers,” he says.
Thomas Clay, a consultant from Altman Weil, says most firms have shifted their compensation systems to focus on fee receipts, rather than billable hours in the last 15 years.
“When they look at productivity, do they look at hours? Yes,” Clay says. “But if you can’t get the fee receipts in the door, do you get less credit for your hours? Yes. In the end, you can’t spend hours at the acme—you can only spend cash.”
Magnus says removing the yearly billable hour requirement may boost associate morale, but the new compensation system is not a “radical departure” from Jackson Lewis’ current process.
“We’ve always been good at not being wed to the billable hour,” he says. “This just codifies what Vinny has been getting across for years.”