Some days, it’s hard to untangle the effects of the pandemic, the recession in parts of our economy and the law business, and the massive ongoing changes in the business of legal services.
But one change in how lawyers practice is clear: More and more lawyers, law firms and corporate law departments are discovering the usefulness of contract or temporary lawyers.
Use Cases
A law firm gets hired to handle an emergency, injunctive-relief proceeding in federal court. Several weeks of intense discovery must be conducted over the next month, and the firm’s lawyers are already busy on other matters they can’t drop.
A CEO tasks her general counsel with closing a significant acquisition and integrating the target’s hundreds of vendor contracts into the company’s own contract management system. But the general counsel realizes that deal due diligence and the imminent integration project will blow her budget at the hourly rates of the company’s usual outside counsel.
Could hiring a cadre of contract lawyers from a staffing company help? It sure could.
Legal Economics
The law firm or corporate law department will soon discover when it shops that on-demand, short-term legal help might be available from nonlawyer staffing companies. This option avoids the need for the law firm or law department to staff up with full-time lawyer-employees for an impractically short time.
Savvy shoppers will almost always also find that the costs associated with law firm or corporate employees, or the rates charged the company by its outside counsel, will significantly exceed the charges of staffing companies. So far, so good.
But savvy lawyer shoppers with ethics training may also be concerned: Can I buy lawyer services from a commercial company? Can I pay lawyer fees to an outfit other than a law firm? Isn’t that fee-sharing or unauthorized practice of law or something unethical? (After all, you are reading an ethics column.)
Ethics and Economics
Short answer: No, it is not, assuming it’s done right.
Many in the profession first learned of “contract lawyers” or “temporary lawyers” around the time the ABA issued the leading ethics opinion in this area more than 30 years ago. Since 1988, lawyers and law departments have spent a generation quietly expanding their use of this tool to temporarily—and sometimes not so temporarily—extend their capacity.
How can a company other than a law firm sell lawyer services—and how can lawyers buy those services from someone other than a lawyer or law firm—without ethics trouble?
The ABA's Influential View
ABA Formal Opinion 88-356, Temporary Lawyers (Dec. 16, 1988), concluded that paying a staffing company for the services of a temporary lawyer did not mean the company was practicing law or that legal fees were being shared with nonlawyers, even where the client, for example, paid the staffing company $100 an hour for the lawyer’s work, and the company paid the lawyer only $75 an hour.
This opinion is accepted in virtually every American jurisdiction as correctly stating the law. It’s hard to think of another ABA ethics opinion that has been so widely accepted, even in jurisdictions with no authority on the question.
One key requirement: The contract lawyer must be supervised by a lawyer other than a lawyer employed by the staffing company—that is, another lawyer representing the same client and responsible for overseeing the temporary lawyer’s work. This means, of course, that, for this model to work, the ultimate client receiving the legal services must have another lawyer—in-house or outside—overseeing the case or project.
Further, the ABA noted that the staffing company, not being a lawyer or law firm, may not exercise any direction or control over the independent legal work or judgment of the lawyer. Indeed, prudent staffing companies go to great lengths to avoid acquiring client confidential information about the temporary lawyer’s work, other than that needed as an employer.
Charging the Client
The ABA further explained how temporary lawyer service may be billed by a law firm to its client in ABA Formal Opinion 00-420, Surcharge to Client for Use of a Contract Lawyer (Nov. 29, 2000).
The law firm hiring the temporary lawyer to handle urgent discovery can get paid for this work in two ways. First, it can simply treat the staffing company’s bill for temporary lawyer services as an outside expense, like an expert or a court reporter, and charge for it as an expense “below the line” on its bill. Of course, that means the law firm cannot upcharge for that—it must pass the expense, and only the expense, along directly.
Second, the firm can treat the temporary lawyers just like other firm lawyers on its billing, showing their time “above the line.” Of course, this confirms to the client that firm lawyers are, in fact, directly supervising these temporary lawyers. If it chooses this option, the firm may freely charge the client whatever is reasonable for these services, without regard to what the firm is paying the staffing company. If the staffing company is charging the firm $100 an hour, the firm can—if it is a reasonable fee—charge the client $200 an hour. After all, no law firm is required to disclose to its clients how much it pays its associates or partners.
The economic advantages for law firms are obvious. They’re also obvious for law departments, whose corporate employer can simply take the savings on lawyer rates directly to its bottom line.
Conflicts, Anyone?
Ah, clever readers will inquire, but what about conflicts of interest? Doesn’t all this temporary work open up a conflicts minefield, with contract lawyers carrying conflicts from all their assignments around with them like Mary Mallon carried the bacillus that caused typhoid fever with her? Actually, no.
ABA Model Rule of Professional Conduct 1.10(a) provides that, when lawyers are “associated in a firm,” the conflicts of one lawyer are generally imputed to all other lawyers in a firm: My conflicts are my partner’s conflicts.
Perhaps the most important conclusion of ABA Formal Opinion 88-356 was that contract or temporary lawyers are different, and their conflicts are not imputed, where they do not share access to confidential information about matters other than the ones on which they are working. Thus, contract or temporary lawyers are not “associated in a firm” with the lawyers of the firm or law department for purposes of matters they are not working on, so long as they are screened from confidential information about them.
Telling the Client?
One last ethics question: Is the law firm required to disclose to the client the fact that it is using contract lawyers?
The ABA’s 1988 answer was simple: If the lawyer was being directly supervised by a firm lawyer representing the client, then, as a matter of ethics, the lawyer was not generally required to disclose the fact that the lawyer being used was a temporary lawyer employed by a staffing company, rather than the law firm. However, if the lawyer was unsupervised, then disclosure must be made.
As the use of temporary and contract lawyers quietly grew, the ABA offered guidance on the broader questions associated with all manner of “outsourcing” of services, including legal services, in ABA Formal Opinion 08-451, Lawyer’s Obligations When Outsourcing Legal and Nonlegal Support Services (Aug. 5, 2008). As more varied use of contract or temporary lawyers to outsource legal work had emerged, this opinion pointed to instances where disclosure, or even consent, might sometimes be required, such as engaging non-U.S. lawyers or other situations where there was not a high degree of supervision.
Temporary or Contract Creep
This temporary-or-contract-lawyer business model has crept into several corners of the law business.
Staffing companies have morphed into “alternative legal services providers” or ALSPs. Some larger law firms have established their own affiliates in response. Some e-discovery companies now provide lawyer staffing for high-level document review. Corporations have outsourced specialized segments of their law departments. Some companies now specialize in providing high-end, part-time or retired lawyers to law firms and law departments for specialized, often-temporary assignments.
Prudent lawyers can expect even more growth, and more opportunities to support and expand their practice with the help of lawyers provided on this business model.
ABA Opinions on Contract or Temporary Lawyers
ABA Formal Opinion 88-356, Temporary Lawyers (Dec. 16, 1988)
ABA Formal Opinion 00-420, Surcharge to Client for Use of a Contract Lawyer (Nov. 29, 2000)
ABA Formal Opinion 08-451, Lawyer’s Obligations When Outsourcing Legal and Nonlegal Support Services (Aug. 5, 2008)