Youshea A. Berry is the principal of the Law Office of Youshea A. Berry in Washington, D.C. She may be reached at firstname.lastname@example.org.
You are a solo practitioner in a large city. You have worked for two years to create a niche in your market, and you have finally started to make a name for yourself. Clients you have served well are referring other potential clients. Networking through your local bar associations, regular trips to the gym, and weekly visits to the dry cleaner have increased your stream of new clients. These clients have an understanding of your practice areas, and their issues are diverse. Alas, you are but one person. But you can effectively serve your growing client base with the help of some temporary outside help.
Contract lawyers (also known as temporary lawyers or independent contractors) can be of great assistance when you are overwhelmed with work. The mention of contract lawyers often brings to mind million-dollar legal temporary agencies that make substantial amounts hiring out lawyers at market rates, but discussed below is a group of lawyers who serve solo and small law firms as independent contractors.
Don’t hire an employee when you want an independent contractor. It is extremely important to understand the difference between an independent contractor and an employee before you decide to hire for your practice. Failure to understand the nuances involved with this kind of hiring can lead to substantial fines from the IRS; in addition you may have to pay any back taxes that you (as the employer) failed to withhold from the independent contractor’s fees.
When using independent contractors, you may ask only for a specific outcome of an assignment; you may not direct the procedures that will lead to the outcome. For example, if you need a complex shareholder agreement for your firm, you generally may not direct how the independent contractor does the work. (The IRS makes exceptions for basic instructions to independent contractors, for example, scope of instructions, extent to which the business retains the right to control the worker’s compliance with the instructions, and the effect on the worker in the event of noncompliance.)
The IRS and the courts have used the following criteria to determine whether a worker is an independent contractor or an employee: (1) whether the hiring party holds or exercises behavioral control over the independent contractor; (2) whether the hiring party holds or exercises financial control over the independent contractor; (3) the overall relationship between the independent contractor and the hiring party. A more complete description of the independent contractor guidelines and forms is available at www.irs.gov
Another strong indication of an independent contractor relationship would be the fact that, as the hiring party, you do not take any withholding from payments to the contractor. You are not responsible for state or federal taxes, Medicare or social security withholding, or unemployment tax for independent contractors. Each year, however, you must report payments to independent contractors in excess of $600, using IRS Form 1099-MISC.
A simple way to determine whether you are acting as an employer is to submit a completed Form SS-8, Determination of Worker Status, to the IRS, which will make a case-specific determination for the worker in question.
Determine an hourly amount for independent contractors. Pay scales vary widely by jurisdiction and skill area. The cost of hiring a lawyer as an independent contractor to do a relatively simple job in a small market would differ substantially from that for an experienced communications lawyer doing sophisticated FCC work in a large market.
There are a number of ways to determine how much you should pay potential contractors, ranging from simply asking colleagues what they paid for such services to learning a local temp agency’s going rate for contract lawyers. Legal services agencies generally have a strong grasp of what the individual market will bear for a specific class of lawyer.
The Internet also offers a number of sites that can give you an idea of how much lawyers might expect to be paid for certain work. Visit www.payscale.com
for an example of how to determine a competitive salary for an independent contractor lawyer in your area.
Consider the ethics. When hiring a contract lawyer, adhere to your state’s rules of professional responsibility. The ABA Model Rules are a great guideline; however, individual state rules covering legal ethics and the unauthorized practice of law determine whether you are within the rules.
With respect to the ABA Model Rules, the issues identified as most important in the area of contract (or “temporary”) lawyers (set out in ABA Formal Opinion 88-356 (1988)—Temporary Lawyers) are these: conflicts of interest, confidentiality of information, disclosure to client, and arrangements with placement agencies (irrelevant for our purposes here). Although many states’ professionalism guidelines are closely aligned with the ABA Model Rules, check your state’s rules before hiring a contract lawyer.
Secure an agreement. The best way to create an independent contractor relationship is to secure an independent contractor agreement with the lawyer before she begins work for your firm. This is the clearest indication of the parties’ intent. As we all learned in law school, where clear manifestation of parties’ intent can be shown, a court is reluctant to infuse its own logic.
• The Complete Guide to Contract Lawyering. 2004. PC # V04CGCB. ABA Career Resources Center . To order online,