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Do I need to track my time if I charge my legal clients a flat fee?

Flat fee arrangements occur when law firms provide specific services to a client for a one-time fee, no matter how many hours the attorneys spend on those services. Many law firms attempt to streamline their law firm practice management by moving to fixed fee billing. The idea is the less time that attorneys and staff spend tracking their time or entering the time and costs into a legal billing program the more time they have to handle client matters, which increases the firm’s revenues. [1]

The ethical rules regarding these types of arrangements vary widely from state to state, but no state requires attorneys to send monthly invoices to clients showing the time spent on a flat fee matter. [2]

Although law firms are not obligated to issue bills to clients showing the time spent on a flat fee matter, here are several reasons why law firms may want to have the attorneys track their time anyway:

  1. In many states, flat fees are refundable if the attorney doesn’t perform any services or if the attorney only provides part of the agreed-upon services. Courts look to the time and labor spent on the actual services provided when determining what portion of the flat fee the law firm may reasonably keep. [3] If your law firm fails to keep adequate records of the time spent on a flat fee matter it could be difficult for a firm to justify keeping even a portion of the flat fee.
  2. Where the law firm’s client may have a right to seek attorney’s fees from the opposing party.  Courts require counsel to submit invoices showing the time and costs spent in order to justify the requested attorney fee award amount. If the prevailing party’s attorney cannot provide adequate records, the court may not be able to award the client as much as it could if it had the documentation needed to justify the reasonableness of the requested fees. [4]
  3. If a client sues for malpractice, claiming that your firm did little to no work on the case, you have your attorney timesheets to show exactly what work the attorneys actually did on the case.
  4. Sending timesheets or invoices to your clients which show the time your firm spent on the matter is a good way to update clients about the status of their case
  5. Reviewing invoices is a good way to refresh your memory about what happened in a case if you ever need to do so [5]
  6. Tracking attorney and staff time in some way, formal or informal, allows your law firm to determine whether or not its flat fees are set too low or too high.

For all of these reasons, although a law firm may not want to spend administrative resources on tracking attorney time on flat fee matter, it may still make sense for the firm to do so.


References

1. Five Questions About Fixed Fees You’re Afraid to Ask
2. ABA STATE BY STATE CHART OF ALLOWABLE FEES PAID IN ADVANCE
3. 5 Tips to Avoid Ethical Pitfalls in Flat Fee Agreements
4. 6 Ways To Avoid Paying A Price For Using Fixed Fees
5. 3 Reasons to Track Time in Fixed Fee Cases