Let’s start by considering a common scenario. Your law firm has an constantly growing amount of work from new clients . On one hand is a great thing because business is steady. However, resources are limited and hiring a full-time in-office associate attorney isn’t feasible for a variety of reasons. So, what do you as a business owner do? Should you consider outsourcing legal work?
Instead of hoping quality won’t be impacted because the rest of your team is spread way too thin, outsourcing has become a viable option. It’s one thing to consider outsourcing legal work because the work needs to get done. However, is it ethical to profit from a remote associate?
A Big Misperception
One of the biggest misperceptions about legal outsourcing is that some attorneys think they can’t bill a freelance lawyer’s time and work to their client. They mistakenly believe that outsourcing is an expense and not a revenue opportunity. This couldn’t be further from the truth.
Outsourcing substantive legal work to freelance lawyers (aka contract lawyers) is a great way to get work done and to make more money. Realistically, staffing your practice with remote attorneys is smart business for any service provider. So, when it comes to the ethics of outsourcing, you absolutely can profit from a remote associate.
Outsourcing itself is not a novel concept. Business operations have functioned this way for centuries. The misperception about fees and billing is connected to ethical implications surrounding profiting from remote workers. For years, every industry, including those working in law, has needed and found ways to contract with part-time help. It’s efficient, cost effective, and in many instances just absolutely necessary.
Understanding ABA Model Rule 1.5
The key ethics rule to keep in mind is ABA Model Rule 1.5, which says that an attorney may bill their client for work at a reasonable market rate. That includes outsourcing work to freelance lawyers.
Think about it this way. This is the exact same business model that larger law firms have used to make a lot of money for decades. They do this by leveraging the work of associates. They hire an associate and pay them a salary which breaks down into a certain hourly rate. They then bill that associate’s work to the client at a higher billable rate – a reasonable market rate – making a nice profit along the way.
Solo attorneys and small firms can do this with outsourcing legal work. For example, you find a freelance lawyer to prepare a motion for summary judgment and agree to pay them a flat fee of $1,000 for the assignment. The work is being done on a flat fee rate but the freelancer still keeps track of their time. After the freelancer completes the motion, they give it to you along with a timecard reporting how much time they worked on the motion.
A Reasonable Market Rate
Based on your geographical location, your market, practice area, the amount of experience of the freelancer, and the complex nature of the work, you determine that the reasonable market rate to bill your client for this work is $200 per hour. Thus, you’re going to bill the freelancer’s time to your client for a total of $1,700 (8.5 x $200). Keep in mind that you paid $1,000 to the freelancer to get that work done. This means you’re looking at a profit of $700 on just one project.
Now, imagine if you delegated just one new project every week over the course of a year. We already discussed that you can outsource motion writing but you can also delegate work like document review or legal research. In addition to reducing the time consuming task of recruiting, you can grow your firm. You could bring in additional profits of more than $36,000 a year ($700 x 52 = $36,400) just by leveraging freelancer time leaving your own time free to bill on other cases. The bottom line is that you can make a healthy profit by outsourcing work and stay ethically compliant with legal industry standards.
Outsourcing legal work to the Next Level
Now let’s take it a step further. Let’s say you sign up for LAWCLERK’s Remote Associate Subscription program. You find a talented remote associate to help you produce high-quality work for 40 hours a month and you’ll pay $100 per hour. Keep in mind you can increase those hours as needed as your workflow will ebb and flow over time.
Your remote associate will work those 40 hours (and maybe more) and give you a time report that you can bill to your client at a reasonable market rate. We’re talking about producing valuable quality work. For a small business, outsourcing legal work is invaluable for your profit margins and overall well-being.
Let’s say you determine the reasonable market rate for this remote associate is $275 per hour. If you bill all 40 hours this means you would be billing the client $11,000 for all that extra work your remote associate completed. Keeping in mind that you paid $4,000 to get legal services done this means your firm’s monthly profit grew by $7,000 in just one month!
Now if you keep working with your remote associate via the subscription program over the course of an entire year, you will bring at least an additional $84,000 of profit to your law firm with no added overhead.
This is a major win financially but also in terms of the significant workload that the freelancer can help you complete. Now this is a win-win!
The Cost Of Outsourcing Versus Hiring A Full-Time Associate
When considering the benefits of outsourcing legal work versus hiring, the associated costs of hiring a full-time associate can add up to a minimum of $190,000. That number factors in salary, insurance, bar dues, continuing education, malpractice insurance, bookkeeping, and equipment.
For many, the cost savings alone are strong enough to justify outsourcing over hiring full-time employees. Yet, there are plenty of other benefits of using freelance attorneys to tackle remote work.
Ethical issues will always be important aspect of the business of law. Conflicts of interest need to be monitored and addressed. Today’s savvy attorneys know that profiting from hiring remote associates isn’t only ethical, it also makes smart business sense.
LAWCLERK is Here to Help You Grow & Scale Your Law Firm
At LAWCLERK, we believe the most cost effective way to grow a law firm is to hire smart, delegate and limit expenses. That’s why we built the nation’s largest legal marketplace, where new law firms and solo practitioners can connect with freelance lawyers – so you can grow your practice flexibly. You control the projects, pricing, and deadlines, and we’ll handle the tax reporting and administrative work.
When you’re ready to take your firm to the next level, we can help match you with a remote associate. Whether you’re just starting the process of building your firm or are shifting to a new digital model, we can help. Find out how we can help your firm prosper.