The SESCO Report – February 2022
SESCO's Guide to Attorney Overbilling
Although lawyers have been ridiculed and made fun of it seems forever for their unethical practices, and many rightfully so, in recent years with the extreme competition within the legal business, overbilling is a major problem. Law firm overbilling or whether described as "bill padding" or simply "billing fraud" is a serious problem that is frankly seldom discussed and even less frequently addressed. Two-thirds of lawyers admit that "bill padding" occurs at their firms and one-third of lawyers openly "double-bill" clients. More than half of all lawyers perform work not because the client or case demands it, but because the lawyer needs to bill more hours to meet their firm's quotas and lifestyle. Some of the more common gouging practices that lead to billable hour inflation include:
- Block Billing — Approximately 90% of law firms bill on an hourly basis and bill their clients on a "block billed" basis. Block billing is an accounting technique where lawyers aggregate multiple tasks into "block" entries. An example would be a phone call, revising a junior associate's draft motion, three (3) minutes dashing off a brief email, that are all rolled up into blocks of an hour. Regardless of why it happens, the fact remains that block billing is big business for law firms and a massive expense for clients.
- Two the Hoarders — Another problem clients face is billable hour "hoarding." As the economy has slowed and billable hours are at a premium, work tends to be retained and billed by the senior level attorneys. This results in partners doing associate work and associates doing paralegal work and paralegals doing secretarial work. As one court eloquently phrased it, "Michelangelo should not charge Sistine Chapel rates for painting a farmer's barn."
- Three Hour and a Half Incremental Billing — When lawyers bill by the hour, they should never use increments greater than one-tenth of an hour. Yet, it appears that anywhere from five (5) to ten (10) percent of lawyers bill clients in unacceptably large chunks of time — usually in one hour or half-hour increments. This is neither honest nor reasonable and constitutes outright billing fraud, as courts have held that the "professional person who charge their clients fees in excess of $80.00 per hour, based upon time spent, cannot, in all honesty and reasonableness, charge their client for increments in excess of one-tenth of an hour."
In all reality, the problem doesn't fall solely on attorneys. Although they have a "license to steal", clients need to manage their attorney relationships as they would any other normal vendor. However, many business owners and managers are scared, strongarmed or simply frightened by the entire "legal" process which plays right into the hands of lawyers.
Another common problem we see with SESCO clients such as nonprofits or public agencies such as a housing authorities, counties, cities or other "board" or "commissioner" managed entities. Many organizations will have a board retained attorney who will embed themselves in the organization and the organization frankly becomes their own personal "slush fund." Regardless of their expertise, these agency or board retained attorneys will take advantage of their relationship as, again, there is very little, if any, push back.
Recently, SESCO reviewed a client's (housing authority) employee handbook. The employee handbook was so poorly drafted and non-compliant that our recommendation to the housing authority was to completely redraft a new employee handbook. Soon thereafter, the attorney of the housing authority pushed back as the attorney was not only the one who drafted the very poor handbook, but also wanted to update and revise the employee handbook based upon SESCO's thorough review and analysis. Obviously, the attorney had no experience in drafting these critical documents but also was so embedded in the housing authority that he did not want anybody encroaching on his "slush fund."
It's time that clients actively manage their attorney relationships. The following is a basic guide as established by SESCO to assist our valued clients in this process. Further, those SESCO clients who need an attorney should contact us as we have developed relationships with excellent attorneys.
1. First determine whether or not you need to engage an attorney. There are significant resources available such as a firm like SESCO who does not bill by the hour. A majority of our time is covered under our monthly Service Agreement so that there is no concern upon our clients on whether or not they are going to be gouged. SESCO maintains certified consultants and attorneys on staff for this service. There are other like firms available. Frankly, unless engaged in an actual lawsuit, you typically do not need an attorney.
2. An attorney is not an attorney not an attorney. Physicians are very professional when it comes to their practices. An internist does not engage in orthopedic surgery. However, it seems that because an attorney has "a license", he or she can do anything. These are the unethical lawyers that you need to stay away. These are the ones who will on one day grind a workers' comp case, the other day close a real estate deal, the next assist a family in an adoption, and the last develop an employee handbook. Always ask for the experience of an attorney according to your specific needs. If you receive, "Yes, I prepare employee handbooks," ask them how many and for whom and subsequently contact references. Over our 80 year plus history, we have just had too many clients burnt by attorneys who claim to be "experts" and frankly have little or no expertise and business in providing the services.
3. Of course, confirm rates of which they will normally do in an engagement letter. However, when engaged, find out which staff will be providing the work, re: senior partner, associate or even paralegal and subsequent rate. Require a thorough accounting of each service to include by the tenth of the hour.
4. Although you probably will not receive such, ask for a quote, preferably a not-to-exceed quote. Ethical attorneys will know and understand how much time it will take, especially if they have extensive experience in the matter. For example, SESCO Management Consultants quotes not-to-exceed fees for all of our consulting work to include employee handbook development. We know exactly how much time it is going to take. As such, avoid open-ended billing as once you receive that "huge" bill you are not going to be able to argue and reduce the amount.
5. Work with your association. Whether it is a national or state trade association, talk to your colleagues and seek their advice. Most good, ethical attorneys will not have to market their services. They are referred and become very well known in business circles for the type of work that they do.
In summary, it is time to reign in law firm overbilling and representing clients in matters that they have little or no expertise.
SESCO's Standards of Practice
1. SESCO recommends our services only if we believe that real benefits will be realized by the client.
2. We make certain that client receives a clear statement of the objectives and scope of the proposed work and a quote and cover this in writing by a letter of confirmation.
3. We will accomplish our work efficiently, consistent with professional thoroughness and without disrupting the daily operations of the client whenever possible.
4. We will educate client staff with principles, methods and techniques so that improvements suggested or installed may be properly managed and continued after completion of our consulting engagement.
5. We will keep our client up-to-date and informed of our work at all times.
This Date in SESCO's History — 1961
This famous picture depicts our founder, J.W.R. Lawson, Sr. in crossing the picket line at Roanoke Electric Steel, the country’s first “mini mill” and first continuing steel casting plant. Roanoke Electric Steel was founded by John W. Hancock, Jr. who was an icon in the steel industry.
This image became famous as not only was Lawson one of the first to truly "fight" unions, but also note that he is escorting a young black man across the picket line. Crossing a picket line (SCAB) was a very dangerous thing to do. In addition, the individual was black. How brave! Labor Relations Consulting during the 40’s, 50’s and 60's was not for the "faint of heart" as Lawson stated. But further considering racial relations in this era, that Lawson had the guts to escort a black person across the picket line was even more remarkable and frankly brave.
We are very proud of our historic firm and the services that we have provided to our clients since 1945. We sure miss J.W.R. Lawson, Sr. (Uncle Joe) for his tireless inspiration, perspiration and desire to serve others fearlessly. He was the first Employee Relations specialists in the country and a true Icon! Our success rate in defeating the unions is unsurpassed.
P.S., due to SESCO’s efforts, Roanoke Electric Steel turned a profit and as Mr. Hancock stated, "he was forever indebted to the efforts of SESCO and Mr. Lawson, Sr."
Important Notice to SESCO Retainer Clients
As we move into 2022, it is important that the cornerstone of employer-employee relationship, your employee handbook, is up to date, compliant to federal and state employment regulations and also contains the necessary policies to protect you and your organization.
SESCO retainer clients receive a free review and analysis of your employee handbook and if there are few changes, you receive these revisions as well under your Service Agreement. We would urge that SESCO clients email or mail your employee handbook to us so that we can conduct this analysis.
SESCO Client Feedback
"Hello Jamie, we just had a 6-month review call with North Cross School. Elise DeMoss, HR Manager, spoke very highly of you and SESCO. We are so thankful to have you on our team!!" ~ Janet Lee, Group Benefits Account Executive — Bankers Insurance
"You are the best!! You are the only HR back up I really have and I really appreciate everything you do for me under our service agreement." ~ Sandra Sibold, Human Resources Manager — Rockbridge Area Community Services Board
Special Thanks to New SESCO Clients!
Remote Area Medical, Inc. (RAM)
Cunningham's Automotive Repair
Tire City Tire Pros
CA Stearns Incorporated
Heritage Management Services Company
Fair Oaks Motors
Bird Automotive Repair
Oak Grove, MO
Johnson City Housing Authority
Johnson City, TN
Client Question — SESCO Answer
Client: "We are writing up an exempt salaried employee and we are considering suspending him without pay for five (5) days. Will this affect his FLSA exemption status?"
SESCO Response: There are six (6) scenarios that the FLSA allows an employer to "deduct" from an exempt employee's guaranteed salary. One (1) of these is for disciplinary suspensions, so yes, in full-day increments the salary can be suspended and the individual will not lose his exemption status.
Client: "How do you feel about hiring convicted felons?"
SESCO Response: (After giggling) This was a serious question and is the unfortunate reality of today's available (or lack thereof) employee talent. We, in fact, discussed the individual in detail to include considering how long ago the felon was, the individual's job progression since and results of reference and background checks. In the end, the individual was not hired but the reality is based upon due diligence that there may be times a client may hire a convicted felon.