Contract Attorneys: Pros and Cons
by Gavin Rubin
(County Bar Update, April 2002, Vol. 22, No. 4)

 

Contract Attorneys: Pros and Cons

By Gavin Rubin, Esq., Law Practice Management Section Executive Committee. Rubin is a principal with Attorney Network Services, which provides full service legal staffing to both law firm and in-house legal departments. He can be reached at (213) 430-0440. The opinions expressed are his own.

One of the most difficult problems facing law firms is appropriate staffing of work that enables the firm to make a profit. As the economy slowly recovers this year, firms will require additional staffing. Many firms struggle with the question of hiring a contract attorney before they commit to hiring a full-time attorney.

One of the advantages of a contract attorney is reduced cost for the firm. Contract attorneys only receive payment for services when they work. Therefore, if workflow slows, the contract attorney is dismissed, and the labor cost to the firm ceases. Furthermore, there are no separation costs to the firm if the contract attorney is an independent contractor or hired through an agency since there’s no need for a severance package or unemployment compensation.

By engaging a contract attorney, the firm has no ancillary costs associated with a full-time hire. If the contract attorney is an independent contractor or an employee of an agency provider, there are no payroll taxes, workers’ compensation costs, or benefit costs.

Depending on the experience and specialty of these individuals, their bill rates to a firm can range from $75-$125 per hour. It’s not uncommon for the utilizing firm to turn around and bill their client anywhere from $200-$300 per hour for the contract attorney time. If you factor in a very generous $25 per hour overhead costs, the utilizing firm can realize up to a $200 profit per hour.

There are also some potential pitfalls in using contract attorneys. One is conflicts. Every contract attorney has worked on other matters. It’s essential that a diligent conflicts check be undertaken regarding each potential contract attorney.

Another issue is malpractice insurance. Everyone makes mistakes. The question is how much is it going to cost you. Do your contract attorneys have their own insurance? If so, does it cover them working in a contract capacity? Most carriers will cover contract attorneys under your existing policy if the carrier is placed on notice of contract employee utilization and contract employees don’t make up more than a certain percentage of your work force.

There are also wage and hour issues. Contract attorneys are usually paid by the hour. Are they exempt from overtime under the new wage and hour law? It’s not clear. Under the old system it was clear there was an exemption. Under the new system hourly employees are subject to overtime. Some firms feel they are exempt and don’t pay overtime. Others just simply operate on the side of caution and pay overtime.

The final pitfall is one of trust. Who is this person? Is this person competent? Nobody really knows how the attorney will perform until he or she starts working. Employers should use the same due diligence they use for full-time hires as contract hires. Interview the individuals before they begin work. Ask them substantive questions about the area of law in which they practice. Ask for references and check them. And always do a check of the individual’s credentials on www.calbar.org.

When your law firm is ready to hire additional attorneys, weigh the pros and cons of using a contract attorney prior to committing to full-time hire.

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