Firms hire contract attorneys for a variety of reasons, not the least of which is an attempt to control expenses.  While reducing expenses is a good thing, the financial savings isn’t the only issue in play.  Unfortunately, unintended consequences could arise if no thought is ever given to a few other issues.  The issues that come to mind most readily for me are conflicts of interest, accountability for work product, disclosure, and insurance coverage in the event of an eventual allegation of negligence.

Addressing these issues is problematic, however, because the term “contract attorney” means different things to different people.  IRS definitions and regulations aside, contract attorneys can run the gamut from fulltime “employees” being held out as members or associates of a firm to temporary part-time attorneys who never step foot within the walls of the firm.  For the purposes of this article, I am going to focus on those contract attorneys who are not publically being held out as fully employed by the firm at which they are working. 

Let’s look at the coverage concern first.  Don’t assume that coverage for contract attorneys under your existing policy is a given.  While some insurance companies make no distinction between “contract attorneys” and “employed” attorneys, others do.  This means that some insurance carriers will automatically add contract attorneys to your policy, once notice has been given and the appropriate amount of premium has been paid, and others will not.  Why?  One reason is that contract attorneys are often temporary and/or part-time.  Do these part-timers have their own clients, to include other firms that they work under contract for?  It’s an unknown risk.  In situations like this, the contract attorney may need to purchase his or her own coverage.  That said, always confer with your carrier when making a decision to hire a contract attorney (or attorneys) so that the situation can be fully understood, documented, and appropriately underwritten if the carrier is willing.

The decision as to whether to use contract attorneys is not something that should lie exclusively with the firm.  Clients may or may not be comfortable with contract attorneys and thus clients should be included in the decision making process.  Ethical rules aside, whose matter is it?  It’s the clients. I would argue that clients fundamentally deserve to know who will be working on their matters due to confidentiality, competency, and financial concerns at a minimum.  Explain to your clients why the use of contract attorneys is necessary, let them know who this individual is and what they bring to the table, detail what the savings will be, and share the steps that will be taken to ensure that confidences will be maintained.  In the end, it’s all about maintaining the attorney/client relationship.

The accountability piece is an interesting issue.  Under agency principles, the firm is going to be liable for what the contract lawyer does within the scope of employment.  Sometimes firms will try to do an end run around this concern and treat the contract attorney as an independent contract attorney.  This may be partially effective if the contract attorney is fully independent (think in accordance with the IRS definition) and the client has been made aware of the situation and consented to it.  I say partially effective because there will always be the possibility of a negligent hire claim should the independent contract attorney commit malpractice.  Given this, appropriate risk management practices are called for whenever utilizing the services of contract attorneys.  Adequate supervision and work product review are a given.  You might have the contract attorney sign a confidentiality agreement and instruct staff to not discuss firm matters in front of the contract attorney.  You would also be well advised to inquire into the background and experience of a potential contract attorney hire as well as ask about past claims or disciplinary matters prior to making a decision to hire.

Perhaps the most significant issue with contract attorneys is the imputed conflict problem.  Here the specifics of the working relationship will matter.  There is going to be a real difference in how the conflict problem plays between a contract attorney who never steps foot inside the firm’s physical space, has no access to firm files, and only works for your firm; and a contract attorney who works internally, has access to client files, and works at one or two other firms at the same time.  To minimize the risk of unintended conflict problems arising, limit the contract attorney’s access to client files to the greatest degree possible.  Here, isolated space or off site space and no access to the firm’s computer network are worth the effort.  In contrast, the greater the degree to which a contract attorney becomes associated with a firm the greater the likelihood that all conflicts this attorney carries will be imputed to the firm.   Understand that this isn’t about how the contract attorney is paid.  It’s about length of time in your employ, scope of the relationship with the firm, degree of client contact, access to client files, the clients’ understanding of the relationship, etc.

The decision to use contract attorneys can be an appropriate decision that brings real value to the firm and the clients you serve.  Just don’t rush into this for the expense savings alone.  There can be unintended consequences that, in the end, prove more costly than if you had never hired the contract attorney in the first place.  Think it through and make an informed decision for you and your clients.