May 2016

Contract Attorneys — The New Normal?

By Matthew Lab

Assistant Director, Career and Professional Development Office, California Western School of Law

When I first heard the term “contract attorney,” I was baffled. At that time in 2012 or so, I was chatting with a recent law school graduate who I knew had devoted her entire law school tenure to the pursuit of a career in criminal defense. She told me she was a contract attorney, and I thought she was preparing contracts for clients. Thankfully, without advertising my confusion, I quickly understood that she was in fact working as an independent contractor for criminal defense attorneys and not flirting with malpractice by drafting business contracts…

Fast forward to the present, contract attorneys account for a growing segment of the employment market for attorneys of all levels of experience, which I believe is a good thing for all parties. It appears that, like staff attorneys, the contract attorney is now a permanent addition to the legal market. Here are some of the pros and cons of becoming a contract attorney from a career development standpoint:

What are the benefits for the contract attorney?

  • The ability to work with and learn from a variety of attorneys.
  • Flexibility of handling your own work load and schedule.
  • Low overhead because you will typically work from a home office.
  • A good way to build experience and reputation within the local bar, which can lead to referrals and permanent job prospects.
  • No billable hours!
  • Resume building and helps avoid the experience gap.
  • May lead to regular work with a variety of attorneys and steady income.

What are some of the risks for the contract attorney?

  • The perception that contract attorneys are just between jobs, although this perception is waning as the Contract Attorney becomes more prevalent in the market.
  • Lack of range in experience; for example if you are mainly handling appearances or doing document review.  Try to diversify your work as you gain experience and confidence.
  • Potential tax issues (no withholdings) and lack of employer-sponsored benefits.
  • Potential professional liability; thus it is important to verify whether your work is covered under the hiring firm’s E&O policy.

What are the benefits for the employer?

  • No overhead for the employing firm because it is only paying the hourly rate (i.e., no salary, benefits or office expenses), which may provide value to the client if the savings is passed on.
  • Flexibility of being able to choose the exact amount of legal talent it needs, when it needs it.
  • Quick turn-around on projects.
  • Potentially larger pool of skilled attorneys from which to choose for particular projects.
  • Allows the firms to more efficiently handle work-flow (and collections) ebbs and flows.
  • Provides the firm another method to thoroughly evaluate candidates for potential permanent employment.

What are some of the risks for the employer?

  • Federal, state and local tax, and civil consequences if the contract attorney is deemed inappropriately classified as an “independent contractor” rather than as an “employee.” Thus the hiring firm must take steps to ensure that the engagement of the contract attorney meets all current Internal Revenue Service and California law criteria for that determination.
  • Per State Bar Formal Opinion 1992-126, the hiring attorney is responsible for and adopts the contract attorney’s work product as its own, and thus must take steps necessary to ensure quality.
  • All attorneys must perform legal services competently (CA-RPC-3-110), and thus the hiring firm needs to adequately screen the contract attorney for his/her qualifications for the assigned tasks.
  • Potential conflicts of interest.  All attorneys involved must conduct a conflicts check.
  • Contract attorney most likely will not be as closely supervised as the firm associates.
  • Hiring firm should disclose the use of contract attorneys to its client as well as its E&O carrier.