The survey of 500 solo/small firm Toronto lawyers found that the vast majority (88%) rely on the billable hour to value their legal services. The average hourly rate was $338, with rates ranging from $78 to $750. While 64% offered some form of free initial consultation, the average initial consultation fee was also $338. Excluding contingency fees, only 5% offered alternatives to hourly billing such as fixed fees or day rates. Overall, the dominance of the billable hour may be challenged as lawyers begin to leverage technology to provide more affordable and convenient legal services.
1. April 2009
Is Time Running Out on the
Billable Hour?
I
am a lawyer. It wasn’t easy getting here. With the emergence of new technologies
I spent 7 years and $100,000 going to (e.g. request for quote processes through
university to get 3 degrees. I passed the www.DynamicLawyers.com) beginning
We interviewed 500 randomly selected Bar exams, articled for 10 months, and to penetrate the mainstream legal services
solo/small firm Toronto lawyers and then started my own law practice. But now industry, trends towards commoditization
that I’ve finally become a member of an and unbundling will expand. Consumers
found that: esteemed profession, I find myself dealing of legal services will rely more and more on
daily with a negative stigma left by lawyers technological mediums such as e-mail,
■ Their average* hourly rate gone and perpetuated by lawyers present. That internet, smart phones, social networking web-
was $338. stigma, as I’m sure you’ve guessed, is legal fees sites, etc., to shop around for the best deals.
(as characterized by the billable hour) and They will look for value-added services from
■ Hourly rates ranged from it’s left a bad taste in the public’s mouth. reputable, accessible, and affordable legal
$78 to $750. service providers; they will also expect to be
The billable hour, perhaps the defining and able to compare the total costs of such services.
■ Their average initial consultation most contentious issue surrounding legal
fee was $338. services, is relied on so heavily because lawyers In doing so, this new breed of client will
don’t really know what their services are worth create opportunities and competitive advantages
■ 64% offered some form of free and have little experience in estimating the total for those lawyers who leverage technology to
initial consultation. cost of such services. There are many unknown promote themselves and deliver cost-effective
variables which can complicate matters and cause legal services to the masses. It is in this new par-
■ Excluding contingency fees, initial time estimates to become meaningless. adigm that the billable hour in its current form
only 5% offered alternatives may evolve to have a much lesser role to play in
Yet the billable hour is an antiquated and valuing legal services or cease to exist entirely.
to hourly billing such as fixed unsatisfactory valuation method. It deprives
fees, day rates, barter arrangements, clients of predictability over the costs of With these things said, I wanted to know the
quotes, pay-as-you go, per legal services. At the same time, it provides current state of legal fees in general – and the
project, etc. the wrong financial incentive for lawyers to billable hour in particular – in Toronto, Ontario,
continue working on files (e.g. litigation Canada. As such, the purpose of this report was
Overall, the predominance of the lawyers who settle disputes early on become poor, to survey 500 solo/small firm Toronto lawyers to
billable hour may be challenged while those who drag their feet become rich). help answer the following 7 questions:
The billable hour can also create other ethical and How prevalent is the billable hour?
as solo/small firm Toronto lawyers
professional problems within the lawyer-client What was the average hourly rate?
begin to leverage technology to relationship (e.g. lawyers pad their dockets or How does that rate change based on
provide legal services in a cost-effective fail to keep clients informed of the running experience and primary legal area practiced?
and convenient manner to the masses. bill). It is also to blame for lawyers’ work-life What was their average initial
imbalance (i.e. working 14 hours a day to bill 8 consultation fee?
* the word “average” means “weighted average” hours). Finally, valuing legal services according How many provided a free initial
throughout this report to the time a lawyer spends working on a file consultation in some form?
stifles innovative billing methods which would What was the average legal fee for certain
otherwise allow more people to (perhaps basic services?
Prepared by: simultaneously) access legal services from that What alternatives to hourly billing do
Michael Carabash same lawyer. they offer?