Associate Wins Big Verdict from Former Law Firm Employer

Law firms worship at the altar of the billable hour. No doubt about it. The hour is the basic component which law firms sell. Not wisdom. Not professional expertise. Not value. No, it comes down to the hour. Now I’m not at all saying that’s what clients are intending to buy. They want to buy the expertise and wisdom, and know they are receiving value for their dollars. But they recognize and for the most part accept that the cost will be determined in most cases by the cumulate number of hours needed to produce and deliver what they seek.

Hour times rate equals billing. Hour times rate less direct costs (production cost e.g. salary and benefits) and less indirect costs (proportionate share of overhead) equals profit per hour. It’s that simple from the law firm perspective.

And so law firms must carefully monitor the creation of their “inventory” of hours. And that means that they must set goals for production. In order to motivate people to achieve those goals, they tie aspects of compensation or advancement opportunities to achievement of those goals. And they apply penalties to the failure to achieve the goals.

It’s totally reasonable to have a goal of billable hours for each attorney and paralegal. Of course, many firms fail to actually let the attorney and/or paralegals know exactly what those goals are. They also fail to provide reporting or feedback so that the employee can track their progress.

I spent this weekend conducting a retreat to which associates were invited to participate from midday on. What came up was not so surprising. The associates had no idea of what their goal was, nor how they were doing. The only feedback they received was a brief verbal statement to the effect “you’re reaching your goal” or “you’re not reaching your goal.” The managing partner was surprised, as they had received a report recently which supposedly provided that information. But it seems that no one told them how to read the report, and so the associates had no clue what the numbers on the page represented. And even if they had somehow picked up on summary of hours on the page, it was meaningless in the absence of any knowledge of their goal.

Some firms live and die by the hour, and anything else be damned. But if you survey your associates you will find out that they want to be valued for far more qualities than their ability to work and record billable hours. That’s not to say there should not be goals of hours which must be achieved. But there is so much more that goes into being a valuable associate and future partner which is NOT measurable in billable hours.

A recent article in ABA eReport drove home this concept. The title of the article reads “FIRED ASSOCIATE WINS $1.1 MILLION JUDGMENT: He Claimed He Was Dismissed Over a Reduction in His Billable Hours“. Of course, his former employer now says that he was fired due to insubordination for failing to properly schedule vacation, being unreachable during that vacation, and not expressing regret or even admitting he did anything wrong upon return. Sniff, sniff, sniff . . . do you smell something fishy?

Well, the jury definitely concluded that the law firm’s version of what transpired did not pass the smell test. There were other associates at the firm, apparently all of them, who failed to reach the billable hour goal of the firm. None of them were fired. Ironically, the only associate who had reached the goal in the past was the one who was terminated. And none of the others had an illness which would have necessitated a temporary reduction in hours. None but the plaintiff. Ouch!

It seems that the plaintiff also followed established procedure in putting scheduled vacation on the firm-wide calendar. Why was he uncharacteristically unreachable? He claimed he used the time to attend a memorial service for his late father-in-law. Well I suppose he could have left on the cell phone during the service and following family get together. But is that a reasonable expectation? Something to be fired over?

The plaintiff’s attorney said, “My suspicion is that one thing that made the jury empathize with him was that this was an arbitrary decision. He got fired in a huff over something that most people wouldn’t deem worthy of termination.”

The verdict was not surprising, according to Lawrence C. Levine, an employment law professor at the University of the Pacific McGeorge School of Law. He is quoted in the article saying, “I don’t understand what the firm could have been thinking allowing this case to get to trial. And there is some sort of irony that it’s an employment law firm involved in this case. They should know better.”

Of course the law firm is appealing the verdict.

What is the lesson to be learned by this case? Well, it seems to be the first wrongful termination case involving a goal of billable hours that has gone to trial, let alone resulted in a verdict for the plaintiff. So the first lesson is probably that there will be more such cases in the future. In addition, your firm wants to make note of the following, none of which is new, but all of which keeps cropping up:

1) if the only measurement you utilize to assess and reward or penalize associate performance is the volume of hours produced, you will
a. struggle to hold onto quality associates;
b. fail to measure and encourage other equally valuable aspects of performance; and
c. ultimately elevate to partner some unsuitable candidates

2) if you do not communicate the goals clearly, and/or do not regularly provide associates with information to measure their performance relative to those goals, you will
a. find that associates fail to meet the goals more often than not;
b. greatly elevate the stress level of the associates unnecessarily; and
c. find associates who meet the goal by recording inflated hours which the firm ultimately cannot bill

3) even if you have communicated both goals and progress, your firm needs to
a. uniformly reward and/or punish based on success or failure to achieve the goals
b. be sure to take other factors into consideration which might influence achievement such as i.) illness or disability; or ii.) uneven assignment of work

As is evident from this verdict, failure to learn these basic lessons can be costly.


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