According to a Wall Street Journal article and accompanying Law Blog post, the down economy is increasingly leading clients of large law firms to pressure those firms to trim their fees. As a result, says the WSJ, large firms are outsourcing more legal work to India.
As I noted back in August, independent US-based contract lawyers generally provide unique, individualized services to small firms and solo practitioners, and this work is less subject to commoditization than the document review work for corporations or large firms that forms the majority of legal work that is shipped abroad. Nevertheless, small firms and sole practitioners are no doubt facing at least as much pressure to trim their fees as large firms are experiencing; in fact, the individuals and small companies that comprise the client base of many small firms are likely even more cost-sensitive than the big companies that are represented by BigLaw.
These circumstances—combined with a recent ABA ethics opinion that explains the benefits of using contract lawyers, analogizes contract lawyers to associates (but without the overhead), and clearly states that it is ethical to earn a profit on the work performed by contract lawyers—present an unprecedented opportunity for independent US-based contract lawyers.
Outsourcing legal work to a contract lawyer is cost-effective for clients, since even a rate that includes a reasonable profit to the hiring attorney will generally be less than the hiring attorney’s own hourly rate. Outsourcing is also cost-effective for hiring attorneys. Bringing on an associate immediately adds to a firm’s fixed expenses in the form of salary and benefits, increased malpractice rates and (most likely) increased overhead for office space. By contrast, hiring a contract attorney to work on a discrete project doesn’t increase fixed expenses. Contract lawyers who clearly communicate these benefits to potential hiring attorneys will find their practices growing by leaps and bounds.
Additionally, although the WSJ article accurately notes that Indian lawyers must be closely supervised by US lawyers to comply with ethical norms, the Law Blog post states only that US-based “temp attorneys” “may need less oversight.” Neither piece cites ABA Formal Op. 08-451, which states that, when hiring a foreign lawyer, a hiring lawyer must consider whether the system of legal education under which the lawyer was trained is comparable to that in the United States; whether the foreign lawyer is subject to a professional regulatory system that inculcates core values similar to those in the United States; the “legal landscape” of the nation to which the services are being outsourced (and, specifically, whether personal property, including documents, may be susceptible to seizure in judicial or administrative proceedings notwithstanding claims of client confidentiality); and whether the judicial system of the target country will provide prompt and effective remedies to avert prejudice to the client in the event of a dispute between the foreign service provider and the outsourcing lawyer. These ethical considerations present a heavy burden for small firms and solo practitioners.
The rates for contract attorneys are going down, law firms start to believe that a couple of hours overtime will a) make them experts and b) will get the job done.
Contract attorneys are at the bottom of the food chain and the recession does not help.
Joe Miller says
Large law firms will soon go the way of the radio business. Being a US-based contract attorney may seem tough now, but what is going to happen is that CAs are going to begin taking on higher level work. Since law firms are sending jobs to India they won’t be able to hang their hats on what schools their associates attended to justify obscene salaries. CAs are going to rebel. It’s not a question of “if” but “when.”
Lisa Solomon says