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general / Law Practice Management

Contract attorney complications

It is becoming more common for law firms to use contract attorneys to assist with large projects or document reviews to help keep costs down. Indeed, using contract attorneys can provide a number of benefits.

For example, contract attorneys allow firms to meet the demands of a particular matter without committing to the costs associated with hiring a new full-time attorney, especially when it may be uncertain whether there is sufficient work to support hiring a new attorney. In addition, when a matter requires specialized knowledge in a particular field, a contract attorney with experience in that field can help the firm deliver quality legal services to the client.

However, as with many new trends in the practice of law, there are some risks inherent in the use of contract attorneys. However, by considering these risks, and having appropriate supervision and controls, firms can use contract attorneys to meet client demands and their bottom line.

Potential Conflicts Issues

When a contract attorney is hired as an employee and works exclusively for the firm and its clients, conflict issues are relatively straightforward. The issue is more complicated for contract attorneys hired as independent contractors.

One way to address this issue is to establish an "exclusive" independent contractor relationship with a contract attorney so that the conflict analysis only involves one set of clients. Under this arrangement, the law firm and the contract attorney agree that the contract attorney will do work only for the one law firm. Not surprisingly, contract attorneys may expect some commitment from the law firm, whether in the form of compensation or a workload commitment.

For firms that prefer to use contract attorneys on a purely "as needed" or nonexclusive basis, the law firm can consider conflicts each time the attorney is retained on a new matter. The firm can also implement certain procedures to "wall off" the contract attorneys from other client confidential information within the firm.

On this issue, California State Bar Formal Opinion 1992-126 provides guidance regarding the obligations of both the law firm and the contract attorney: "This Committee believes that the responsibility for checking conflicts of interest falls on both the firm and the contract attorney...A prior employment client/case review between the firm and the contract attorney concerning potential conflicts of interest should be part of the hiring process. To facilitate identification of conflicts, the contract attorney should maintain a personal record of clients and firms for whom he/she has worked, in addition to a general description of the work performed for the clients. The firm engaging a contract attorney has the most direct obligation to maintain an accurate record of the contract attorney's work for each of its clients and to monitor for conflicts on a routine basis."

Accordingly, most firms implement processes to ensure that conflicts are monitored or identified when using contract attorneys.

Appropriate Supervision

As is evident by their name, a contract typically defines the nature of the relationship between the contract attorney and a law firm or attorney. The contract can be an employment agreement that makes clear that the contract attorney is not on a partnership track, or it can take the form of an independent contractor agreement that provides payment for the time worked by the contract attorney but does not provide the benefits associated with an employment relationship (presuming that the contract otherwise meets the IRS requirements for an "independent contractor").

Generally, it is the law firm that undertakes the attorney-client relationship, as opposed to the client contracting directly with a contract attorney. Accordingly, the duties owed by the law firm to the client include the duty to supervise work performed on their behalf by the contract attorney to ensure compliance with all applicable ethical, professional and legal obligations. These obligations are, among others, to maintain confidences and secrets, perform ordinarily skillful work, and otherwise abide by the ethics rules.

A law firm should therefore consider how to fulfill its duty to supervise when using contract attorneys. A good place to start is with the contract itself, which can specify exactly what the contract attorney has been hired to do and the need to abide by the law firms' protocols, practices and procedures, including the commitment to abide by all ethics and professional rules.

A law firm can take steps to review or supervise the contract attorney's work to ensure that it meets the appropriate standards. By simply passing along the work of contract attorneys, the law firm assumes some unnecessary risks.

Overtime Pay for Contract Attorneys

An increasingly common issue is whether a law firm hiring a contract attorney for certain types of work will be required to comply with all of the rules relating to employer-employee relationships, notwithstanding the fact that the employee is an attorney.

Contract attorneys have recently sued some high-profile law firms, seeking overtime pay for document review work based on the theory that document review does not constitute "legal work" and, as such, is not subject to prohibitions on overtime. Some courts - including the 2nd U.S. Circuit Court of Appeals - have suggested that document review does not constitute "practicing law" and thus work by contract attorneys work may not have been exempt from overtime pay.

Although these issues continue to be litigated, most law firms hiring contract attorneys as employees will carefully consider the rules, regulations, and laws that attach to an employment relationship.

Clearly Define the Relationship

To avoid these risks, many law firms will take steps to reduce or eliminate ambiguity. First, a law firm can make clear (preferably in writing) that both the law firm and the contract attorney agree to abide by the ethical, legal and professional rules that apply regardless of the type of relationship that may exist.

Second, it is helpful to document the exact nature of the relationship, whether employee or independent contractor. For each option, confirm compliance with the rules, regulations and laws that may apply.

By taking these steps, law firms can enjoy the benefits of contract attorneys while limiting the associated risks.

#74

Ben Armistead


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