Question: When does a 3-minute call from a divorce lawyer who charges $300 per hour cost MORE than the same call from a lawyer who charges $400/hr.?
Answer: When the $300/hr. lawyer charges in portions or “increments” of 2/10 of an hour, and the $400/hr. lawyer charges in 1/10 increments.
The great majority of divorce lawyers charge by the hour. Their hourly rates depend on factors such as expertise, reputation, location, and perhaps how much they’re shelling out for their kids’ college education.
Clients correctly consider hourly rates a key consideration in choosing a divorce lawyer. The problem is that hourly rates are usually misleading.
Based solely on their hourly rates in the above example, you would expect “Attorney 300” to charge you $15.00 for that 3-minute call, and “Attorney 400” to charge $20.00.
But they won’t.
Why? Because neither of those lawyers charge for the actual minutes spent. Instead, “Attorney 400” charges in increments of 1/10 (.1) of an hour (6 minutes), and “Attorney 300” uses increments of 2/10 (.2) of an hour (12 minutes).
What you see…and what you get
You know how the interest rate on your credit card isn’t what you actually pay? That’s because banks charge interest based upon something other than your card’s overdue balance.
Most lawyers’ hourly rates aren’t what you actually pay either. That’s because lawyers base their charges on something other than the actual time they spend; namely, increments of an hour. And what makes incremental billing so expensive is that when lawyers bill in 6 or 12 minute increments, those increments become minimum charges. A lawyer using .1 increments charges a minimum of 6 minutes for anything she does on your case—even if it only takes 2 or 3 minutes. And a lawyer using .2 increments bills even more in extra fees—a minimum of 12 minutes!
Put anther way, clients pay more than their lawyer’s hourly rate every time a .1 increment lawyer spends less than 6 minutes on a task, or a .2 lawyer spends less than 12 minutes.
The “effective hourly rate:” a more accurate measure
Those minimum charges are the reason that hourly rates alone are an inaccurate measure of how much a lawyer charges. As a result, minimum charges can mislead people who compare divorce lawyers’ hourly rates when deciding which one to hire.
A more accurate comparison of lawyers’ charges can be made using what I call the lawyer’s “effective hourly rate” (EHR). EHR is more accurate because it takes into account both a lawyer’s hourly rate and the increments in which she charges.
To illustrate how EHR works, let’s look again at that 3-minute phone call.
“Attorney 400,” who charges in .1 increments, will charge $40.00 for that call: $400 x .1 = $40.00 ($13.33 per minute).
But “Attorney 300,” who charges in .2 increments, will charge $60.00 for the same 3 minutes: $300 x .2 = $60.00 ($20.00/minute)!
To compare the two lawyers’ 3-minute EHRs, simply multiply their per-minute charges by the 60 minutes in an hour. That yields a 3-minute EHR (are you sitting down?) of $800/hr. for Attorney 400 and $1,200/hr. for Attorney 300.
While your heartbeat recedes from atrial fibrillation range, remember that EHR and hourly rates typically differ only as to tasks that take less than 6 minutes for .1 increment billers, and less than 12 minutes for .2 increment billers. EHR doesn’t apply, for example, to a half-hour meeting because it exceeds both the 6 and 12-minute minimum charges. Thus, hourly rates accurately measure the cost of that meeting at $200.00 for Attorney 400 and $150.00 for Attorney 300.
Nevertheless, minimum charges add up. While they won’t make Attorney 400 cheaper than Attorney 300 over the course of a divorce, they substantially narrow the difference between Attorney 300 and a lawyer charging $350.00/hr.
Reducing the impact of incremental billing
You can’t eliminate the extra fees generated by incremental billing. But you can reduce them.
First, find out what increments a lawyer uses before you retain him. As shown in our example, lawyers using 12-minute increments rack up substantially more in extra fess than those using 6-minute increments. And very few of the .2 billers that I know hit enough home runs to be entitled to that big a bonus.
Another way to control minimum charges is to avoid them whenever possible. Wait, for example, to call your lawyer until you have several topics to discuss, rather than just one. And don’t call your lawyer at all to check whether a hearing has been scheduled; contact a staffer instead.
If you’re considering a 12-minute minimum lawyer, make sure the extra charges will be offset by a lower hourly rate or some other benefit such as special expertise that’s needed in your case.
In all events, use your understanding of legal fee billing to save money in your divorce.
Learn more about saving money during divorce
in Larry Sarezky’s new book
DIVORCE, SIMPLY STATED available at amazon.com.