Law firms are desperate to keep their clients – legal freelancers can help them out

It has been less than a year since the legal industries pundits were claiming that hourly rates for lawyers would not decline despite the recession and that the traditional billable hour fee structure was not going to change. See our January 28, 2009 “Quality vs. Quantity – the billable hour mousetrap” blog article.

What a difference a few months makes. The ABA Journal and the Legal Business Development blog are reporting a startling development – large law firms offering loss leader pricing for services. Examples are offers of handling discovery for free, offers to cut hourly rates in half for the first phase of litigation, and doing motion work for 30% of usual rates.

I agree with one of the participant’s in the Legal Business Development blog’s survey about these practices –

[In one recent competition] another law firm bid a price which quite frankly we
thought was not sustainable. And there are really only two or three answers as
to why they did that. One is a loss leader. The second is sheer stupidity. And
the third is a willingness to take an extraordinary risk.

Large law firms are struggling with the entire concept of adapting their fees in an environment where clients have gained the upper hand in determining whether their legal budgets go. They aren’t used to operating without significant streams of revenue.

The good news for legal freelancers is that you are perfectly positioned to help out these law firms. Your rates were always lower than employees because of reduced overhead, and you never insisted on wearing $700 suits and driving Ferraris. You simply wanted to practice your profession on your own terms at a rate commensurate with your expertise.

Here is your sales pitch. First, you offer high quality services at a price that they can mark up and still be a reasonable rate for their clients. Second, unlike emerging legal process outsourcing (LPO) companies in India or other places around the globe, you are local and they can personally meet with you and assess your competence. Any client should be a little queasy about their law firm outsourcing important legal work outside of the United States to persons unknown.

[read the remainder of this article at the new NAFLP website]

The true nature of legal freelancing - setting the record straight

There are many misconceptions about legal freelancing on the internet, so much so that I am compelled, again, to explain the fundamental differences between “freelance legal professionals” and other things such as “contract attorneys.”

Freelance legal professionals are self-employed

Freelance legal professionals are their own employers, maintain their own office, pay their own taxes, arrange for their own insurance and benefits, set their own schedules, set their own fees, sets their own working conditions, and market their services directly to law firms and inhouse legal departments. Freelance legal professionals do not work directly for, nor get paid by, ultimate clients. They do not work for, nor get paid by, an employment agency. Freelance legal professionals, whether licensed attorneys themselves, or paralegals or other service providers, work on an independent contractor basis for licensed attorneys who have the relationship with the underlying, or ultimate, client.

Freelance legal professionals sometimes work on a project-by-project basis, or may have a long-standing relationship with a law firm, doing work on a long-term and ongoing basis. The key distinction between the freelancer and an employee, however, is that the freelancer is paid as a 1099-reportable independent contractor, whereas the employee is paid as a W-2-reportable employee. Other distinctions flowing out of that relationship are the level of control over how the work is done, where it is done, and whether the worker can do work for other law firms.

“Contract attorneys” are employees of agencies

The type of work that is more commonly known phrase “contract attorney” or “contract lawyer” is actually that of an employment relationship between an employment agency and the legal professional (this arrangement is also common with other legal support personnel). The employment agency contracts with law firms for the use of their (the agency’s) employees to perform work on a temporary basis. The agency bills out for the worker’s time, billing rates that are marked up from the hourly rates paid to the workers. The agencies are, as employers, responsible for withholding taxes and, at least theoretically, responsible for insurance and benefits. Agencies, pursuant to their contractual arrangements with law firms, control working schedules, work location, working conditions, fees, and marketing (in general) to law firms and inhouse legal departments. They can, and often do, cancel scheduled assignments without any cancellation fees to the contract attorneys.

Work for legal employment agencies is on an assignment basis has many barriers to transition from temporary employment via agency to direct employment with the law firm. These barriers often include segregation of contract attorneys from the firm's associates and partners, and substantial payments due to the agency by a law firm wanting to “buy out” the temporary worker's contract. The temporary employee usually has no voice in negotiations over such buyouts, nor do they have any say in working conditions or pay rates.

Why do we at NAFLP care about such distinctions?

NAFLP was designed to assist professionals in the legal industry to gain and maintain the benefits of self-employment, to take control of their careers, and run financially successful businesses. “Contract” or “temporary legal professionals” have little control over their careers and have to sit and wait for their phone to ring with a job assignment. Freelancers are meanwhile out marketing their services, networking, and building successful businesses and never have to simply wait for someone else to hand them a job.

In 2005, the U.S. Bureau of Labor Statistics compiled some interesting data regarding the differences between several types of contingent and alternative employment arrangements. They found that “fewer than 1 in 10 independent contractors said they would prefer a traditional work arrangement.” By contrast, 56 percent of workers employed by temporary help agencies wanted a traditional work arrangement. Source: U.S. Bureau of Labor Statistics, “Alternative employment arrangements and worker preferences,” originally published August 4, 2005.

Horror stories abound about the poor working conditions and career dead ends awaiting any legal professionals working for legal employment agencies. Blogs such as “Temporary Attorney: The Sweatshop Edition” explicitly solicit “horror stories” and seek “help expos[ing] the nasty sweatshops, swindling law schools, and opportunistic staffing agencies.” My Attorney Blog recently posted an article entitled “Disregard Anything Positive I’ve Ever Said About Contract Attorney Work - I’ve Finally Come To My Senses.” With such “marketing,” who would possible want to work that way?

By contrast, personal experiences of freelance legal professionals consistently reflect job satisfaction, financial success, and increased ability to have work-life balance. I have worked as a freelance attorney off and on for 16 years, sometimes full-time and sometimes in combination with my own solo law practice. I have found freelancing to offer endless opportunities and challenges and look forward to receiving projects from my law firm clients. We at NAFLP want others to enjoy the same positive experiences.