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“I agreed to do the work for a flat fee. Now the client calls every single day. I’ve already invested more hours than I thought the entire matter would take. What can I do?”

This issue has been discussed recently in online forums and in law offices across the country. It’s the kind of thing that lawyers fear when they think of converting from an hourly-only business model to some sort of alternative fee arrangement.

But with corporate clients demanding more predictability in fees from outside counsel and consumer clients continuing to ask for an estimate of the total fees when quoted an hourly rate, the momentum for alternatives to the billable hour has never been stronger. How can we avoid the trap of working for free?

While you can never avoid all risks in life, you can minimize your risk in this area with four simple strategies: task-based billing, preemptive communication strikes, employing “change orders” and improving your fee agreement.

• Use task-based billing (as opposed to flat fees)

Some lawyers think of a flat fee for an entire matter as the only alternative to hourly billing.

But a more fair and workable plan is likely some hybrid arrangement that includes flat fees for certain tasks and perhaps even some limited hourly charges.

Most lawyers would be unlikely to agree to an unlimited number of depositions for a fixed fee at the beginning of an uncertain matter, for example, and some might argue that such an arrangement has the potential to create a conflict of interest between lawyer and client.

It could be agreed, however, that preparation for and taking of each deposition would be charged at a “per deposition” fee, with one rate for in-state and another for out-of-state depositions.

• Conduct preemptive communication strikes

Often a “time-wasting” call, particularly from a consumer client, is just an attempt to check on the status of a matter.

This is understandable, particularly if the client has never been involved with this kind of legal matter before and has not heard from the lawyer in a while. But dealing with these calls is a drain on the lawyer’s limited time, while failing to return calls may undermine the attorney-client relationship or even result in a complaint to disciplinary authorities.

This issue should be handled as proactively as possible at the start of the attorney-client relationship. Periods of inactivity should be discussed. A staff person assigned to the particular file might be given a standing assignment to note when there has been no communication for a month and prepare a brief status report for the client.

But some people require more reassurance and “hand-holding.” To guard against the client who calls too often, it may make sense to have a general contract provision that states, “Excessive telephone calls from the client to the lawyer may be billed at the lawyer’s normal billing rate.”

This opens the door for the lawyer to have a conversation with the client, making certain that the client is aware of what actions will move him or her into a “premium services” mode. Some clients will modify their behavior in response, while others may willingly pay for greater access.

• Employ ‘change orders’

Suppose a lawyer was building a home and, in early construction, the lawyer (or spouse) decided granite countertops were needed in the kitchen instead of the material specified in the contract.

What would the builder do? The builder could say “No, too late. You signed the contract” or the builder could say “Well, that’s a lot more trouble and expense for me, but I’ll do it. No charge.” But only a soft-hearted lawyer would agree to do extra work for no charge.

What’s most likely is that the builder would figure out the cost of the modification and some additional profit and give the customer a form called a “change order” that specified additional charges and/or delays and required the customer’s signature.

Lawyers who enter into alternative billing arrangements would be well served to follow the builder’s example. First, the original agreement should specify in detail everything that the lawyer is obligated to do under the fixed fee or task-based billing arrangement. Then when the client decides something else is needed or there is a change in plans, the lawyer provides a change order for the client to sign, specifying the additional steps and additional fees.

Not all clients will willingly and immediately sign the change order, but you have now framed the issues for discussion.

• Improve your fee agreement

Unknown contingencies can increase the cost of legal representation. A lawyer with experience in the type of matter is often in a better situation to anticipate these contingencies and provide for them in a task-based attorney client agreement. But there is always the possibility of unusual events that were not anticipated.

In that case, you turn to the language of the original attorney-client agreement. Sometimes the client will be obligated to pay more and sometimes a fair reading of the contract will require the attorney to handle the complication for no additional payment.

To preclude the latter when possible, you should modify your attorney-client agreement over time, providing for how similar situations will be handled in the future. Hopefully, over the years the contract will evolve so that unforeseen complications will be much less likely to occur.

It’s all about risk

One of the business principals at work in the consideration of alternative billing methods is the allocation of risk. In hourly work, the client assumes all of the risk of a project taking more time than anticipated. In a personal injury contingency fee situation, the attorney assumes the risk of not being paid if there is no recovery.

But just as much as the lawyer does not wish to work for free, the modern client does not want an open-ended unlimited commitment. The traditional hourly model shifts all of the risk of unanticipated demands or complications to the client, with the lawyer being in the position to bill and collect more, subject only to the risk of client nonpayment.

Any alternative billing strategy will entail the lawyer assuming some degree of risk of complications. But if implemented correctly, fixed fees can allow you to do complex and interesting legal work while maintaining firm revenues.

Jim Calloway is the Director of the Oklahoma Bar Association Management Assistance Program. He publishes the weblog, Jim Calloway’s Law Practice Tips at http://jimcalloway.typepad.com. He serves on the ABA Law Practice Management Section Council and is also chair of its Practice Management Advisor’s committee.  He is a frequent speaker on law office management and technology issues.

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