What Law Firms Should Know about Billing for Paralegal Work

CosmoLex Team

Billing for Paralegal Work
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In 1989, the Supreme Court ruling on Missouri v. Jenkins established that law firms can bill clients for paralegal hours in accordance with the market rate, not what the paralegal is actually paid by the firm.[1]

Tracking billable hours for paralegals has become a standard part of law firm culture, but it still leaves the law firm with the question of what to charge. After all, to support your charges to a client, you need to be able to show you’re charging a reasonable market rate.

Determining the market rate

Determining the market rate may seem an inexact science, but there are several resources you can turn to.

National organizations, such as the National Association of Legal Assistants (NALA), periodically conduct surveys on paralegal market rates, including by law firm size and geographical region.[2] Frequently, however, your local paralegal association will have numbers that may be even more directly relevant to your firm.

Ultimately, there are several components that go into determining the market rate for a paralegal including the paralegal’s:

  • Education
  • Experience performing this type and level of legal work
  • Geographic region

Billable hours

The Missouri v. Jenkins ruling also described what can and cannot be considered billable hours. Specifically, billable hours have to entail legal work that’s effectively using the education and experience you’re charging for.

Clerical and secretarial hours may not count toward billable work, regardless of who performs these tasks.1 For instance, if a paralegal organizes files, preps documents, or types a basic email, these tasks cannot be billed for, even though they’re part of running a law office.

The understanding is that they’re built into the market charge rate instead.

Your ethical responsibilities

The system of charging by the billable hour comes with complications. Chief among these is that it puts pressure on law firms—and by extension their paralegals—to have as many billable hours as possible.

This scenario raises an ethical concern around the financial incentive felt by some to fudge the tracking of their billable time or to simply work with less efficiency when it comes to billable work.

Some of the professional responsibility lands on the paralegals themselves. The National Federation of Paralegals sets out ethical considerations for paralegals, including to avoid engaging in fraudulent billing practices, such as:

  • “Inflation of hours billed to a client or employer”
  • “Misrepresentation of the nature of tasks performed”
  • Submission of fraudulent expense and disbursement documentation”[3]

But as an employer, you also have ethical responsibilities. According to the ABA Model Guidelines for the Utilization of Paralegal Services, Guideline 10 states “A lawyer who employs a paralegal should facilitate the paralegal’s participation in appropriate continuing education and pro bono publico activities.”[4]

In other words, law firms need to not simply tell paralegals that they must deliver a certain number of billable hours per year, but also ensure there is space and support for continuing education and public service.

In the long run, leaving time for continuing education and mentorship can increase the amount that can be charged for the paralegal’s billable hours.

Billing and client questions

There will always be a client who asks for a more complete explanation of their bill, and it’s very much within their rights to do so.

There are certain details you should always include on a bill:

  • The tasks performed
    • Note: A concise description should be able to answer the question of whether or not the task was legal in nature and if it utilized the paralegal’s education and experience (i.e. it wasn’t clerical or secretarial).
  • A concise note of the paralegal’s education and experience. In short, you need to show that they’re qualified to do the work performed.
  • Finally, you also need to show that if the paralegal didn’t do the task, you or another lawyer would have had to do it, at a higher rate.

For most clients, seeing evidence of the tasks performed—and that they were performed by a qualified professional—will be enough to address any questions or doubts. For those who do still have questions, be prepared with explanations of current market rates in your area and where the paralegal’s skills and experience place them within the market range.

Solid billing practices

In addition to getting key details onto a bill, there are other billing practices you can implement that help improve client understanding and satisfaction.

First, make your descriptions clear and concise. The client needs to know what they’re being billed for. Otherwise, you will definitely be spending more time explaining than you did generating the bill. However, long and jargon-heavy explanations can overwhelm clients. Aim for simple language and trim overlong descriptions to the essentials.

Next, try to get your invoices sent within a month of performing services. Billing studies from many different sectors of the economy show that clients are more likely to pay a bill if it’s delivered promptly when services are still fresh in their minds.

And finally, consider implementing online credit card payments. Use a legal-specific vendor to protect you from compliance issues pertaining to trust accounts and set yourself up to accept instantaneous, online payments from clients. Make it easy and convenient for them to pay.

Valuing the firm’s time

While determining the appropriate market rate to charge for a paralegal’s billable work is part of valuing your firm’s time, so is investing in basic overhead.

A modern practice management system can save your whole team significant amounts of time and help tip the balance more heavily in favor of billable hours, increased mentorship, and continuing education.

Look for features like on-the-go time tracking, bulk generation of bills, electronic delivery, and linked billing and accounting so that online payments and other changes update across systems and reduce data entry.

The monthly subscription fee of a cloud-based program should more than cover its cost in time saved. Set your team up to bill more hours—without upping internal pressure to deliver on top of pre-existing clerical tasks.

Here’s to work-life balance!


References

1. Justia: Supreme Court: Missouri v. Jenkins, 491 U.S. 274 (1989)
2. NALA National Utilization & Compensation Survey
3. National Federation of Paralegal Associations: Model Code of Ethics
4. ABA Model Guidelines for Utilization of Paralegal Services

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