What Should First-Year Associates Know About Billable Hours?
What Should First-Year Associates Know About
Most law schools do not discuss the concept of the billable hour beyond mentioning it in passing. For attorneys who are just starting out at law firms, however, billable hours are a bit part of day-to-day life. In this post, we will discuss the concept of the billable hour, what a first-year associate should know about the billable hour, and some tips for keeping track of your time as a new associate.
What Should First-Year Associates Know About Billable Hours?
The Billable Hour – What Is It?
The billable hour is the mechanism law firms and a few other organizations use to bill their clients for the work an attorney (or another employee) has completed. Most law firms have a yearly billable hour goal for their associates. While it may be a bit confusing, it is essential to mention that the “yearly” requirement might not reflect the calendar year but instead may reflect the law firm’s fiscal year. (For example, some firms’ fiscal year is September 1st to August 31st, etc.) Therefore, if you are a first-year associate or thinking about becoming an associate at a law firm, you will be given a billable hour target for which to aim. Most law firms maintain yearly target billable hours between 1700 and 2300, but there is a lot of variance from firm to firm.
What First-Year Associates Should Know About Billable Hours
The Real Expectation For Billable Hours
When an associate receives an offer letter from a law firm, that offer letter usually details the law firm’s expectations for the associate, including the yearly billable hour expectations. Exceeding the yearly billable hour expectations is often tied to bonus compensation. For example, if an associate attorney bills 100 hours more than the billable hour expectations, they may be eligible for some bonus payment. Likewise, if an associate bills 200 hours more than the billable hour expectations, they may qualify for a larger bonus payment, and so on.
However, sometimes law firms may have unspoken expectations. What does this mean? It means that although the yearly requirement is 1900 billable hours, associates ought to bill 2000. It is prudent for a first-year associate to ask a slightly more senior associate at the firm about the potentially unspoken expectations. This can be a delicate topic to breach, so we recommend phrasing this question through the lens of “pulling your weight.” For example, a first-year associate may ask a third-year associate: “I know Firm X requires 1900 billable hours per fiscal year. But I want to be sure I’m pulling my weight and am helpful to my group. Is the 1900 billable hour expectation accurate?”
What Flexibility Does The Law Firm Offer?
A first-year associate should know what flexibility the law firm offers. Typically, most first-year associates do not hit their billable hour expectations. There are many good reasons a first-year associate may miss their billable hour requirement. For example, a first-year associate is still learning to capture their time, may be inadvertently cutting their own time, or maybe is not being staffed on a sufficient number of matters.
Most law firms do not expect first-year associates to hit their billable hour expectation. However, when an associate receives an offer letter from a law firm, we recommend the first-year associate candidly ask the law firm what flexibilities it offers. For example, if a first-year associate does not reach their yearly billable hour requirement, how do law firm managing partners and supervising attorneys handle it? Is the firm encouraging and understanding? Is a job on the line? This indicates whether the law firm has a “hard” mandate or a “soft” mandate on the billable hour expectation.
An 8-Hour Day Does Not Equate To 8 Hours Of Billable Time
One of the best examples to explain this concept of billable hours comes from an example prepared by Yale Law School. As the example shows, there is a significant difference between being “at work” and the total hours billed. Taking an hour-long lunch, taking various breaks throughout the day, and working on non-billable tasks such as administrative work does not add to the hours an associate may bill.
The bright side is that many law firms allow associates some credible hours, which are hours for which an associate may bill that are not related to client matters. For example, while an associate’s yearly billable hour requirement is 1950, one hundred hours of 1950 might be considered credible and are meant for spending time training, for in-firm citizenship activities (such as serving on firm committees, spending time recruiting law students for summer positions, or attending firm-based affinity group meetings), and for continuing legal education. In this example, an associate must bill 1850 hours of an associate’s yearly billable hour requirement to active client matters, while 100 hours may be billed to credible hours.
The Method To Insure Associates Are On Track
Equally important for a first-year associate to know is how the firm ensures that associates are on track with their billable hour expectations. Again, this can vary widely among firms. This might even vary within a law firm based on different practice groups. For example, some firms require associates to reach monthly billable hour expectations (yearly expectations divided by 12 months). Other law firms have a quarterly billable hour goal. However, other firms have a much less structured approach, with no temporal-based check-in points or reviews. These associates just focus on satisfying the billable hour requirement by the end of the fiscal year.
Knowing what to expect regarding check-ins and how an associate attorney’s hours are measured and tracked to maintain an “on track” status is crucial for a first-year associate.
An Associate Attorney Should Not “Cut” Their Own Time
While firm policies may vary, most associates – and certainly first-year associates – should avoid cutting their own billable time. What do we mean by not cutting their own time? When an associate keeps track of how long a task or project takes them to complete, they may feel internal pressure to make it seem like a task took them less time than it did. For example, let’s say a first-year associate is asked to work on a 50-state survey of laws. This assignment has the associate research six states. If the associate took 20 hours to do that work across a few days, the associate may feel that it “took them too much time.” Then, the associate might wind up only billing 14 hours for that work. This is an associate cutting their own time.
Law firms have varying policies on this. Generally, though, associates are not issuing bills to clients at the end of the month – partners do that. If a partner sees that an associate spent 20 hours on a project for the client and wants to decrease the client’s bill, the partner can take off some of the associate’s time in the client’s bill. However, this usually does not impact the fact that the associate billed 20 hours toward their billable hour requirement.
As a junior associate attorney, and especially as a first-year associate, tasks and projects will take you longer to do than a senior associate attorney or a seasoned partner. This is part of the process, and law firms know this!
How To Ethically Record Time
While most firms recommend that associate attorneys do not cut their own time and bill the time it took the associate to complete the task or assignment, unethical billing is strictly prohibited. Is it ethical for an associate attorney to claim that they performed work on a project in their billable hour submissions if the associate attorney did not do the work? No.
An attorney lying about performing work in their billable hour violates Rule 8.4(c) of the American Bar Association’s Model Rules of Professional Conduct. An associate attorney lying about their time constitutes engaging in “conduct involving dishonesty, fraud, deceit or misrepresentation[.]” Most state bar associations, which regulate the profession of law, have incorporated the ABA’s model rules of professional conduct into their own rules. Keep in mind that some jurisdictions might even have stricter requirements than the ABA rules. Make sure to review the rules of the jurisdiction where you hope to practice!
What happens if you make it a habit to unethically record your time? You can find yourself in trouble with the state bar’s ethics department! Additionally, you might be responsible for attorney malpractice. A quick google search can show the consequences that a multitude of former attorneys received when they violated this rule.
How To Bill Time Appropriately
This, again, will vary as law firms have different policies and requirements. This also might vary by client within a firm. For example, some clients will not pay for inter-office discussions about a matter. This commonly refers to the time a partner and a first-year associate take to internally discuss the client matter. However, even if the client doesn’t pay for inter-office work, the firm may want you to bill the time. The partner just doesn’t pass that cost along to the client.
While some portions of billing time differ from firm to firm, there are some universal rules for good quality billing. We discuss these parameters in more detail below!
More Detail is Better Than Less Detail
As a first-year associate attorney, you might be asked to review a set of documents associated with a transaction. This is often known as due diligence review or document review. The more detail you add, the easier preparing bills for clients will be for the partners. Additionally, more detail means the client can understand the value you and the firm add to their matter. For example, if an associate attorney reviewed 250 documents, those billing entries may look something like this:
Review of Business LLC’s 250 Board of Director meeting minutes in preparation for drafting a governance outline for the contemplated transaction.
The above billing entry is much more impactful than:
Review Business LLC’s Board of Director meeting minutes.
Check Whether The Firm And Client Allow For Block Billing
Many clients allow for block billing because certain tasks are inherently linked. However, that is not true across the board. What is block billing? It is billing for more than one discreet task at a time. For example, “research Michigan law related to professional attorney ethics of block billing and prepare a memorandum about the same” is technically block billing. Some clients expect this billing entry to be two entries. For example, (i) “research Michigan law related to attorney professional ethics related to block billing” and (ii) “draft a memorandum about Michigan law related to professional attorney ethics related to block billing.”
Craft A Narrative For Billable Time
Crafting a narrative to describe a task for which you’re billing is a crucial task not taught in law school. This, again, will vary as law firms have different policies and requirements. This also varies by client within a firm. For example, as mentioned above, some clients allow block billing while others do not.
However, the equation for how to draft a billable hour narrative is usually consistent.
Present tense active verb describing task + specific information of the task
In our prior example Review of Business LLC’s 250 Board of Director meeting minutes in preparation for drafting a governance outline for the contemplated transaction, the word “review” reflects the present tense active verb associated with the task. And “in preparation for drafting” provides the context of why the task is necessary or part of the overall deliverable to the client.
Additionally, if a task takes an associate attorney longer than one day to complete, most firms use the following structure:
Continue to review Business LLC’s 250 Board of Director meeting minutes in preparation for drafting a governance outline for the contemplated transaction.
And when completing the task:
Finalize review of Business LLC’s 250 Board of Director meeting minutes in preparation for drafting a governance outline for the contemplated transaction.
Most importantly, as a first-year associate, remember that this is not something you should “naturally” know how to do. It is not simple, and it takes practice. So be communicative with your firm if you are struggling, and ask questions when you have them! Taking the time in the beginning to accurately incorporate a firm’s billing practices will save you loads of time in the long run (and saves the partner time when they review the bill!).
Check out JD Advising’s other blog post about attorney life and bar preparation, including How Lawyers Can Give Back to the Community and Approaching Running While Studying for the Bar Exam.
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