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Trends at Work

Solo and Small Firm Hourly Rates: Winners and Losers, by State and Practice Area

During the pandemic, firms with corporate clients have fared better than those with consumer clients.

By Susan Kostal

The fifth annual Clio Legal Trends Report is a fount of information for solos and small firm practitioners when it comes to benchmarking data. I’ll leave the really heavy lifting to others (such as Jared Correia, who dug deep last year in a three-part series). I’ll focus on one key indicator: lawyer hourly rates.

Flip back to the Trends Report’s appendix, and you’ll find a mass of anonymized, aggregate data from tens of thousands of Clio customers in more than 30,000 solo and small firms (from 1-20 employees) across the country (excepting Alaska and Hawaii, where Clio doesn’t feel it has enough users to extract meaningful data).

About 80% to 85% of Clio’s customer base bills by the hour and there are some interesting trend lines. Some are predictable, and some, such as a decrease in hourly rates in certain practice areas, show the impact of the COVID-19 pandemic and the resulting economic gut punch.

A Pandemic Market Reaction

“We saw a very significant negative economic impact across the legal sector,” said Clio’s COO, George Psiharis. “We have yet to fully recover to where we started.” The 2020 survey (along with briefing reports throughout the year) also logged record levels of tech adoption, and record levels of remote work, he added. “We expected to see these trends develop over a period of 10 years, and saw them emerge over a period of months.”

What this means is that 2020’s hourly billing data is a market reaction, but not necessarily a definitive trend. “This creates a huge period of flux for the profession,” Psiharis said. “It affects rates and the structure of firms. We see that cloud-based, client-centered firms outperform their peers, particularly those who have a CRM system for online intake, those who accept online payments, and those with cloud-based portals to increase access to clients.” Firms with those systems in place were able to pivot easier and took less of a hit than their peers, he said.

Tracking Rates by State

I’m going to leave out the latest utilization, realization and collection rates, though they are included in the data. Those are all based on how you manage your business. Again, it’s important to consider how much the pandemic is influencing the stats. More on that later in the post. So, if you even halfway trust this former legal affairs newswoman (liberal arts journalism major with a minor in economics), let’s dig in.

This data is particularly useful if you serve clients across a broad range of practice areas, that is, if you are a general service firm. Here’s what we know.

The Top 10 States for Lawyer Hourly Rates

Just as it did last year, the District of Columbia has the highest lawyer hourly rate, an average of $380, up 8.4% from 2019, when the average was $348. After D.C., the top jurisdictions are, in order, New York at $357 (+3%), California at $338 (+4.4%), Delaware at $333 (+7.2%) and Nevada at $312 (+1.2%).

Rounding out the top 10 are New Jersey ($316, +4.4%), Connecticut ($311, +3.2%), Maryland ($306, +2.2%), Illinois ($298, +3.6%) and Florida ($294, +2%).

Of note: Jurisdictions with high rates were typically better able to increase rates. That’s certainly true for the jurisdictions with the highest average hourly rates and makes sense, as their clients are accustomed to annual rate increases. The average hourly billable rate for lawyers has been on the upswing in recent years, and was nearly $300 by the start of 2020, as shown in the current Legal Trends Report. Use this chart to see exactly where your state ranks.

Lawyer Hourly Rates by State: 2020

RANKSTATE2020 LAW FIRM RATE2020 LAWYER RATE2020 NON LAWYER RATE% LAWYER RATE CHANGE FROM PREVIOUS YEAR
No. 1DC342380189+8.4
No. 2NY338357223+3
No. 3CA308338171+4.4
No. 4DE291333166+7.2
No. 5NV280312166+1.2
No. 6NJ299316186+4.4
No. 7CT290311185-3.2
No. 8MD287306177+2.2
No. 9IL280298164+3.6
No. 10FL262294143+2
No. 11TX253286139+2.7
No. 12VA264282161+2.4
No. 13PA268281187+4.2
No. 14WA25128015+5
No. 15GA252268156-0.3
No. 16MA257268173+1.4
No. 17MN246264142+4.9
No. 18MI247263140+1.5
No. 19NH242261140+8
No. 20CO235258136+1.5
No. 21ND234256153+3.9
No. 22AZ228254137-1.1
No. 23WY233251129+9.9
No. 24NC224247125+2.4
No. 25OR223247126-0.4
No. 26UT264240135+1.6
No. 27NM216239132+3.7
No. 28SC208239110+0.4
No. 29AR220238120+1.6
No. 30MO216238123+2.9
No. 31LA21923592+1.7
No. 32IN218233129+3
No. 33WI222229145+6.5
No. 34TN212228117+3
No. 35OH213223139+1.3
No. 36OK206223120-1.3
No. 37VT2092221053.1+
No. 38ID207221111+1.8
No. 39KS210217151+4.1
No. 40NE212215202+6
No. 41MS191212136+4.2
No. 42KY196205126-2.4
No. 43RI192203106+3.9
No. 44MT183196111+0.5
No. 45AL186195103-1.5
No. 46SD175180107-6.6
No. 47IA170175125+9.1
No. 48ME161171106+1.1
No. 49WV165166155+4.8
Source: CLIO Legal Trends Report (available at https://www.clio.com/resources/legal-trends/2020-report/) Note: AK and HI not included due to insufficient data.

Attorneys in states with the largest increase in rates include Wyoming at $251, up 9.9% from the previous year, and Iowa at $175, up 9.1% from the previous year. However, one could argue that with such low rates for Iowans with a bar card, there was optimistically no place to go but up.

Some states saw a drop in hourly rates, though I don’t think we can draw too many broad conclusions here, as the states differ greatly in business demographics. Connecticut attorneys saw their average hourly rate go from $321 to $311, a drop of 3.2%, though still over the $300 benchmark, a high-water mark that can make some clients flinch. South Dakota saw a drop from $192 to $180 per hour. I’ve traveled in both states, and they could not be more different. Other states with declining statewide average billing rates include Georgia, Arizona, South Carolina, Oklahoma, Kentucky and Alabama — eight states in all.

The Bottom 10 States for Lawyer Hourly Rates

States with the lowest average hourly rates include Nebraska ($215, +6%), Mississippi ($212, +4.2%), Kentucky ($205, -2.4%), Rhode Island ($203, +3.9%), Montana ($196, +.5%), Alabama ($195, -1.5%), South Dakota ($180, -6.6%), Iowa ($175, +9.1%), Maine ($171, +1.6%) and West Virginia ($166, +4.8%).

If you want to find out more about how your state fared, look at Clio’s excellent real-time data here. You can see new matter volume by state and compare it with other states, as well as the national average. My best guess is that lawyers trying to maintain revenue and avoid laying off employees, when possible, accepted lower rates to keep the lights on.

It’s also interesting to see which states were hit hardest by the pandemic and when, and how that impacted new matter volume. For example, New York saw an early and precipitous drop in new matters, but later in the year, it rebounded to beat the national average. California, by comparison, has tracked the national average more closely. The District of Columbia saw some of the highest volatility of any jurisdiction. Literally hours of fun here for data nerds.

Tracking Hourly Rate Data by Practice Area

Here’s where we see the real impact, I think, of the pandemic and how it affected lawyers who have business clients versus those with consumer clients.

The Top 10 Practice Areas

Clio tracks rates in 30 different practice areas. Once again, Intellectual Property work allowed for the highest billing rate, at an average of $351, up 3.1% over last year. The top 10 practices areas all broke the $300 per hour mark, and include Bankruptcy ($347, no change), Corporate ($330, +3.6%), Commercial/Sale of Goods ($323, +7.4%), Employment/Labor ($321, +3.1%), Tax ($320, -1.5%), Trusts ($315, +1.2%), Civil Rights/Constitutional Law ($311, -6.7%), Immigration ($308, +2.9%) and Mediation/Arbitration ($304, +2.9%).

Only two practice areas among the top 10 saw decreases in hourly rates: Tax and Civil Rights/Constitutional Law. Other practice areas that logged a dip include Traffic Offenses (-11.7%), Elder Law (-10.4%), Appellate (-8%), Medical Malpractice (-4.1%) and Insurance (-5.1%). Those decreases make sense when you consider how the pandemic influenced supply and demand. Fewer people driving and the serious shutdown of court services made it difficult to generate or push work forward. When the country is able to open up, I suspect those rates will recover.

Practice areas with the largest increase in hourly rates are Government (+23.7%), Collections (+14.6%), Contracts (+8.4%), Corporate (+7.4), Administrative (+6.4%), Small Claims (+6.1%) and Personal Injury (+5.6%). Considering that the current national inflation rate is 1.4% and the Social Security cost of living adjustment is 1.3%, those increases are significant.

Picking Up the Rear

The lowest hourly rates are $250 and below. Again, it seems to me that many lawyers put stock in knowing how sensitive clients are to certain ceiling rates. The practice areas wrapping up the bottom of the chart include Personal Injury ($250, +5.6%), Traffic Offenses ($246, -11.7%), Elder Law ($239, -10.4%), Government ($223, +23.7%), Medical Malpractice ($216, -4.1%), Insurance ($215, -5.1%), Small Claims ($213, -6.1%), Criminal ($168, +2.9%), Workers Compensation ($161, +3.7%) and Juvenile ($88, +1.1%).

“We saw steady rates for lawyers that serve B2B clients, and more volatility among those that served consumer clients,” Psiharis said.

From the report:

[T]he initial months of the pandemic saw a dramatic slowdown of business, but some types of firms were affected more than others. These impacts were especially felt by firms handling criminal, personal injury, and traffic offense matters, as each of these areas saw caseloads fall significantly compared to the months prior to the pandemic. Less-affected practice areas were those related to business matters — such as intellectual property and commercial/sale of goods — which fared much better in the early months and later on. Matters related to real estate also recovered in the summer and saw new caseloads exceed baseline levels at the start of the year.

You can see how your practice area fared against the national average with this chart by looking at the data on opening new matters. Except for one brief period early in the pandemic, intellectual property consistently beat the national average. Hence, the steady high hourly rates. Meanwhile, family law tracked the national rate quite closely. Tax is down, still well below the national average, hence the drop in the increase in hourly rates.

Hourly Rates by Practice Area: 2019-2020

RANKPRACTICE2020 LAW FIRM RATE2020 LAWYER RATE2020 NON LAWYER RATE% LAWYER RATE CHANGE FROM PAST YEAR
No. 1Intellectual Property3243512093.1
No. 2Bankruptcy3053471380
No. 3Corporate3153301623.6
No. 4Commercial3143231537.4
No. 5Employment/Labor3033211503.1
No. 6Tax295320171-1.5
No. 7Trusts2753151581.2
No. 8Civil Rights/Con Law2843111666.7
No. 9Immigration2873082342.9
No. 10Mediation/Arbitration2873041162.9
No. 11Business2852991501.3
No. 12Real Estate2772931592.3
No. 13Wills & Estates2552891510
No. 14Civil Litigation2662851443.1
No. 15Contracts2682831398.4
No. 16Collections24228014014.6
No. 17Administrative2342781356.4
No. 18Family2372651401.5
No. 19Appellate2512621418
No. 20Construction2362561231.5
No. 21Personal Injury2112501195.6
No. 22Traffic Offenses24424624911.7
No. 23Elder Law2192391472
No. 24Government22722326223.7
No. 25Medical Malpractice2872161044.1
No. 26Insurance200215975.1
No. 27Small Claims2062131576.1
No. 28Criminal1651681372.9
No. 29Workers' Comp1561611433.7
No. 30Juvenile8788821.1
Source: CLIO Legal Trends Report (available at https://www.clio.com/resources/legal-trends/2020-report/)

Where We Go From Here

As many professionals learned firsthand that they could work and successfully operate a business remotely, it will be interesting to see how attorneys’ and staff’s relocations impact both state and practice hourly rate data.

“We think it will take about a year to see how relocation affects the markets,” said Pshiharis. “These are trailing impacts. Some attorneys have picked up and moved, and some folks have let go of office leases altogether.” He added that some attorneys are choosing to pass these savings on to clients, or are investing the funds that would have gone toward rent into improving their technology.

In its survey data, which includes lawyers and firms not on the Clio platform, Clio found that 30% of firms with 10 or fewer lawyers are currently operating without commercial office space.

“Other firms are choosing to keep an office location, but may let staff work remotely,” Psiharis said, which could affect salaries and non-attorney billing rates over the long term. “I think we will see a lot of adjustment. Next year we will likely bring a more established pattern with less volatility.”

And practice areas that took huge pandemic-related hits (think personal injury in New York), will likely recover as the country gets back to something close to normal. The pandemic has been an inflection point. “We have the chance to purpose-build a new normal,” Psiharis said. “We can build a better normal.”

If you want to dig further into the data, download Clio’s 2020 report here.

This is not part of any survey, but as a political junkie, I must note that five of the eight states with declining average lawyer hourly rates voted for Donald Trump in the 2020 election. Three states — Connecticut, Georgia and Arizona — went for Joe Biden, though narrowly.

Illustration ©iStockPhoto.com

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Susan Kostal Susan Kostal

Trends at Work columnist Susan Kostal is a legal affairs PR, marketing and content strategy consultant based in San Francisco. She is a contributing editor for Attorney at Work and previously wrote a monthly column, Content Under Pressure. Susan has covered legal affairs as a journalist for nearly three decades. You can follow her on Twitter @skostal and view more of her content at www.susankostal.com.

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