Jan 162009

Every so often the legal blogosphere erupts in conversation about the plight of contract attorneys. As it really should, because the plight of contract attorneys can often be pretty grim and looks to becoming even more so. It can be feast-or-famine, unstable, life-sucking, dead-end work that also seems to be getting less and less economically viable.

What a waste of an education. What a waste of a profession. Contract lawyering need be none of these things, but a few things will need to change in the legal industry to make it viable, or else it will just cripple the careers of more and more law graduates.

Below I suggest what those changes need to be, and, taking a page from the technology sector, propose better models for how contingent law work can be better leveraged to everyone’s benefit.

The biggest thing that needs to change is the level of respect for document reviewers. The horror stories all suggest an attitude of disposability, as if these people are reviewers because they couldn’t be anything else. Nonsense. Everyone’s story for why they do document review is their own; they need not be impugned for it. They need not be torn down because economic necessity may have caused them to turn to it as a more expedient path to income, or because it complemented their life goals in a way that a more regular salaried position would not. (For instance there are reviewers who would choose it as a lifestyle, working as much as they can for part of the year to support later taking time off to travel and write or spend time with their families.) But these choices keep coming under fire from people who feel their own status is jeopardized when others refuse to play the same game they did. If getting into big law is winning, then naturally everyone who doesn’t is losing. How tragic a view, and how tragically pervasive.

Another significant thing that needs to change is attitudes towards contingent work. Especially now that even those who made it into big law are finding that path unexpectedly unstable given rampant layoffs, contingent labor might be key to the economic survival of the whole industry. I use the technology sector as a model, in which contingent labor has long been a big part of its economic engine:

Every company, or firm, of any size, needs some stable of full-time, salaried employees to hold itself together. But a salaried employee, even in by-agreement states, is still a significant economic commitment for a company in terms of recruiting expenses, termination liabilities, and benefits for the duration of the employment. Companies can’t always afford as many positions as they need for the work they have, especially if the work that needs to be done has finite horizons — once that work is done, then what do they do with that employee? So tech companies have always drawn upon contractors to provide the extra manpower their own core staff cannot. It’s easier for them to budget, since they just need to come up with the cash for the project without incurring the longer-term liabilities that come with expanding their headcount, and it can be a good deal for the contractors too, since contracts may offer greater flexibility and there are many who would prefer to simply earn more cash up front in lieu of the commitment and benefits. When the model works, everyone wins.
But in law the model is not working. For one thing, contract lawyers, at least as document reviewers, are rarely earning enough to tide them over through the downtimes. At $35/hr they theoretically should be able to earn a reasonable $70k a year. But they often are not. Unless they score a long-term, stable project, they earn their money, even with overtime premiums, in fits and starts. While agency contract rates for technical workers may be similar to those of lawyers, these technical contractors don’t necessarily have the massive law school debt loads or state bars constantly demanding more money from them for the privilege of being able to (allegedly) keep earning their living. In law the rates really should be higher. We are, after all, trained lawyers.

One reason they are not however is because there are too many bodies now competing for too few jobs, but again a change in attitude is warranted here: contract attorneys should be viewed as valuable resources capable of much more than document review. The grossest waste in this whole situation is that a firm gets a bright, capable attorney in their doors and then only gives them documents to review, thereby depriving themselves (and their clients!) of any other value the lawyer could provide. Given that even the first year associates aren’t always called upon to provide all the value that they can this situation is hardly surprising. But it is ridiculous and wasteful, and here’s how it could be better:

Law firms should hire, salaried, the associates they need to keep the business together without working them absurdly. Then they should hire contract attorneys as the work load requires and use them effectively. “Use effectively” does not mean locking them off in some forgotten room somewhere: it means integrating them with the team. Only in a good working environment will good work get done, so it’s in the firm’s (and clients’!) interest to make sure the workplace is a healthy one. Then as the law firm’s core business grows, they should be free to convert their valued contractors (temp-to-hire) into salaried associates, should the contractor prefer that option, because, again, the health and success of this or any industry depends on people being able to choose the kind of work that’s right for them.

Secondly, contracting as a business model needs to evolve. In technology there are two major types of contracting, with some other models mixed in. One of the major types is independent contracting, often referred to as 1099 to reflect the tax status. In these instances the contractor functions more like a vendor, usually charging higher premiums to cover the self-employment tax, the lack of eligibility for unemployment during the downtimes, and other infrastructure. A solo attorney already looks a lot like this kind of contractor, so in law co-counseling relationships could also be more of an option, but independent attorneys should still be able to work under the auspices of the larger firm, should everyone prefer it.

The other major type of contracting involves a staffing agency acting as an intermediary. Contractors working through agencies usually make less per hour than independent contractors do because the agency earns the premium, but on the flip side contractors don’t have to find their own work — they can let an agency place them — and they’re often eligible for unemployment during the downtimes. Companies and firms also tend to like this arrangement because they can build a relationship with an agency and then rely on their HR services to manage their labor pool.

But as we see in the document review world, which already generally uses this model, there are some problems with it: during the course of the work the contractor is technically an employee of the agency, but quickly the interests of the contractor and agency may start to collide. The agency must keep the client firm happy, and sometimes they do so at the expense of keeping the contractor happy. When labor is at a premium the agency is more motivated to keep its good contractors happy, and they really should always keep all their contractors happy, but some agencies are better at this than others. The other problem, at least in law, is that agencies have little incentive to enhance the careers of their contractors, since given that they only staff document reviewers, there’s no point in making sure their contractors can do anything else.

If law firms were to use their contingent labor more effectively that situation could change, and there is another model, one which I saw during my years in the technology sector, that might support this change even better. In this model contractors were actually full-time, salaried employees of the agency, and then the agency would be hired by the company to do the work. The great benefit to this model is that, at least in theory, the interests were better aligned. Contractors earned a little less in salary than they would have hourly, but they had more job security, better benefits, and the resources of the agency to develop their careers. The agency, for their part, built a reputation of providing quality work, and its capabilities and success directly aligned with its employees’ capabilities and success. The agency I worked with did this with system administrators, hiring a lot of very junior ones and initially placing them in junior positions on projects, and then training them up to be capable of more — and thus command higher bill rates for the agency.

Imagine how good it would be for law if there were that kind of model. Axiom seems to be an agency most like it, but only for former “big law” expats who have gotten whatever magical “big law” training only big law is apparently capable of providing. The real value in such a system would be for an agency to hire people earlier in their careers and help train them up. Especially for an industry like law where the education provides so little training a model like that would be good for everyone.

Of course, regardless of which model contractors choose to use, as each offers its own advantages, the complicating factor for legal contracting that doesn’t apply to technology contracting is the issue of conflicts. Someone can easily work for Intel and then AMD, but they can’t necessarily work on legal cases for Intel and then for AMD. The problem with too much project work is that it’s too easy to pick up conflicts and thus be ineligible for future work.

But if contingency legal work were to become more normalized, as the industry really needs it to, there would probably be less churn overall, and bar rules (plus applicable state labor laws) could also be adjusted — as to some extent they already have been — to reflect the fluidity of the modern legal career. Client confidences of course must never be betrayed, but the bar rules too often address that concern through rules that anticipate life-long careers at a single firm, a life that no longer exists for anyone to choose.

 Posted by at 8:07 am

  One Response to “Contract lawyering”

  1. This is a really interesting piece. I think one of the factors that distinguishes the law firm contracting model from the technology model or even Axiom is the double level of mark-up which results in the contract attorney getting less of a cut. When large firms procure contract workers, they’re not willing to pay top dollar, because they want to bill those costs to the client. So, firms, for example will pay $100/hr to bill the contract attorneys for $200/hr. Meanwhile, the staffing agencies also want a cut, so they’ll charge $100/hr for the lawyers, but pay them only$75/hr.
    By contrast, in the Axiom or tech industry model, there’s only one level of mark-up. Axiom contracts lawyers to in-house counsel, who aren’t passing on the costs so have no interest in mark-ups. An in-house counsel gets a deal, paying Axiom $300/hr for a lawyer with 10 years of experience, and Axiom can still pay the lawyer $150/hr.
    I also think that many lawyers aren’t fully educated about the pros and cons of document review. I think that some lawyers who take these positions believe that they may eventually be hired, while others don’t realize what the work entails or how much it can preclude other opportunities.
    I would love to see contract work used the way I and some of my contemporaries were able to use it — as a springboard to starting a firm. Back when I did contract work, there were fewer positions, but those that were available were very flexible and often encouraged solos to come on board. Now, I fear that contract lawyering and starting a firm are fast becoming incompatible which means that lawyers either need the resources or risk-tolerance to start a firm without the security of incoming revenue, or will be relegated to contract work indefinitely.

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