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As Legal Outsourcing Proliferates, Ethics Become More Important

The practice of law has experienced major changes over the last generation. A new associate once could anticipate spending his or her entire career with the same firm, making partner after a few years of dogged practice and then easing back to enjoy the benefits of having won the brass ring. Competitive pressures have rendered such expectations rather quaint. Partners now must stay as busy as associates, who for their part often lead a nomadic existence of working for multiple firms during the course of a career.

These trends were already well established when the Great Recession hit in 2008. Since then, competitive pressures only have intensified, and the widespread demand for cheaper legal services has motivated law firms to look even beyond the traditional employment model for solutions. Indeed, a growing number of law firms outsource their work to independent personnel rather than hire new associates to handle it, a seismic shift in the legal landscape.

Legal outsourcing goes by various names such as “legal process outsourcing” (LPO), “legal services outsourcing” (LSO), or “offshoring” if the work is sent abroad. What they all boil down to, though, is the delegation of legal work outside the firm. Legal outsourcing has existed for a long time; the difference today is that rather than delegate non-core tasks such as document review to contract attorneys, law firms increasingly assign core tasks such as legal research and writing to “freelance” attorneys who practice in their own virtual law firms.

A 2012 study, sponsored in part by the London School of Economics, found that the LPO market was worth $2.4 billion and expanding at least 28% per year. The same study revealed that the majority of legal outsourcing goes to India, which has 59% of the personnel who specialize in such work (the United States has only 22%). Even more interesting is a 2010 poll conducted by the American Bar Association (ABA), where 83% of respondent law firms refused to state whether they make use of legal outsourcing. Their reticence strongly suggests that they do.

The exploding popularity of legal outsourcing makes sense when considering just some of the costs of employment as distinguished from the benefits of independent contracting. Whereas an associate must be groomed and trained, a freelancer offers ready-made skill and experience. Whereas an associate draws a salary and job benefits, a freelancer charges by the task with little or no overhead. Whereas clients are often reluctant to pay for an associate to perform their work, a freelancer’s fee is low and may be blended into the firm’s legal fee at a markup. Perhaps best of all, freelancers bring no workplace worries – potential liabilities stemming from hiring, firing, or daily office life completely evaporate.

In the wake of this new trend, it has become crucial to articulate and enforce ethical standards that will protect clients’ interests, given that existing rules of professional conduct do not typically address outsourcing. At present, there are three main sources of ethical guidance for outsourcing, as follows:

  • ABA Formal Opinion 08-451
  • ABA Resolution 105C
  • Ethics opinions from city, county, and state bar associations

With minor variations, these authorities tend to speak with one voice on a host of issues that modern attorneys should become intimately familiar with, such as how to choose an outside provider of legal services; the necessary level of supervision over their work; the licensing of outside personnel; special precautions when outsourcing overseas; when to obtain the client’s consent for outsourcing; the protection of confidential information; and proper billing practices.

Currently, I am offering a Montana CLE course worth 1 ethics credit that explores these issues. The course materials are also available for self-study credit, and in the near future I will create a webinar for use in multiple jurisdictions. Regardless of whether you take my course or somebody else’s, the subject is worthwhile and will become only more so as time goes by. It’s a brave new world in the legal industry. As the old model of large, expensive law firms gives way to smaller, cheaper, and nimbler alternatives, everyone needs the tools to survive in it.

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The Decision to Hire Contract Attorneys Should Never Be Just About the Money

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Wilton H. Strickland is the founder of Strickland & Baldwin, PLLP, a law firm devoted to providing excellent but affordable legal research and writing to attorneys and non-attorneys alike. Wilton obtained his J.D. from the University of Virginia School of Law in 2000, and he is licensed to practice in Florida and Montana. To learn more about Wilton and his firm, visit mylegalwriting.com.

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