Why In-House Legal Departments Should Use More Contract Attorneys

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Highly skilled attorneys trained by the most distinguished law firms are increasingly looking to shift their skill set into the gig economy, guided by a desire for the flexibility and control that was lacking during their intense years of law firm training and which is very visibly cropping up for nearly all other professionals. Roughly 36% of the American workforce is participating in the gig economy and it is now predicted that, within the next decade, this will increase to 50%. Indeed, nearly half of the highest paying freelance jobs are legal jobs.

There are a growing number of lawyers who graduated from top law schools, held prestigious clerkships, spent several years at elite law firms, and are fully capable of handling high-end substantive legal work—including drafting and negotiating commercial contracts, joining deal teams, joining trial or investigation teams, and advising on regulatory compliance matters—but have chosen to not pursue a permanent salaried job, perhaps for family or health reasons, or a desire for a better work-life balance. These are the same attorneys who were once billed out at up to $800 per hour as big law firm associates—now, as these elite lawyers are increasingly contract attorneys, legal departments can access the skill and expertise of these former big law firm associates for approximately $175-$375 per hour (depending on the level of experience required for the task). Some of these contract attorneys have already spent time in a permanent in-house role, even including at the GC level. In this evolving job marketplace, it might be that the best candidate to meet a legal department’s need is not looking for a permanent job, and is available only on a contract basis.

There are many good reasons for corporate legal departments to embrace this shift and consider the benefits of hiring highly skilled contract attorneys to meet varying legal needs, whether it be on a short-term basis, a project-basis, or a long-term/indefinite basis.

1. Converting Fixed to Variable Costs: Engaging contract attorneys is one way of converting fixed costs to variable, a key managerial economics concept that has seen widespread corporate adoption in recent years. Because labor is often the biggest line item on the P&L, a variable workforce is a fundamental component of this shift. Companies ranging from startups to Fortune 500s employ this model with great success, and the availability of highly skilled elite contract attorneys means companies do not have sacrifice high quality legal counsel as they execute this model. We previously addressed the profitability of variable staffing at law firms, and in-house legal departments can reap similar benefits, particularly in lowering overhead costs of the legal department by avoiding unnecessary permanent legal hires when a contract legal hire will suit the need.

Corporations often feel a pull between adding “headcount” (or obtaining budget approval to hire) on the one hand, and the cost of outside counsel on the other. Elite contract attorneys bridge this gap because of their efficient rates, variable compensation, and easy scalability—while also providing GCs concrete data about whether there is indeed enough work to justify a permanent in-house hire

2. Enhancing Agility with On Demand Legal Services:  Corporate legal departments grow as the company and its legal demands expand. Unlike at law firms, where increased work means increased profits, legal is considered a cost center for corporate budgeting. It is critical, then, for legal departments to react nimbly to changes—whether large or small—such as shifting market conditions, seasonal needs (e.g., proxy season), new regulatory and compliance issues, or the advancement of new products or services requiring counsel with a particular skill set. Highly skilled contract attorneys provide a variable resource with no long-term commitment or overhead, deployed or recalled on demand by an agency (i.e., a vendor), which often does not require a company to complete its own lengthy hiring process.

A good time for a company to bring in elite contract attorneys is during the start-up period. Bringing in a highly skilled contract attorney, perhaps on a part-time or interim basis, is a cost-effective way for a start-up company to have access to the services of a GC-level counsel before it is ready to make its first full-time permanent legal hire.

Likewise, for more developed companies, a good time to bring in elite contract attorneys is during an expansion, which creates atypical workloads for law departments that are not indicative of post-growth needs. Acquisitions, for example, often raise one-time legal issues (e.g., regulatory compliance and integration issues) that don’t necessarily justify a permanent hire. Instead of investing resources in costly permanent hires, contract attorneys parachute in for the transition, and allow corporations to gauge the long-term workload without over- or under-committing.

3. Allowing In-House Resources to Focus on Core Tasks:  One of the job features that in-house lawyers typically enjoy is the variety of issues they tackle. Expanding legal expertise beyond the more siloed and specialized practice areas typical of law firms can be professionally fulfilling. The appeal of this variety (and the value to the company) tends to plummet, however, when senior attorneys are diverted to non-core legal tasks—work that must get done, isn’t substantial enough to require a new permanent attorney, and doesn’t justify incurring outside counsel rates. Calling in a skilled attorney to handle these matters on a variable basis reallocates in-house legal talent to its most productive uses.

A good time to bring in elite contract attorneys is for the update of standard legal disclosures, which may require the analysis of an area of the law, e.g., consumer protection laws, in all 50 states; for conducting a risk assessment to identify operational, legal, and compliance risks and propose mitigations (perhaps in the absence of an internal audit department); or, for updating form contracts or other company materials to conform with new policies and procedures.

4. Enabling Smaller Law Firms to Take on Large Matters: Many GCs and their teams are deeply committed to promoting diversity in the legal profession, both within their own departments and through the money they spend on outside counsel. In January 2019, the Chief Legal Officer of car-sharing company Turo—along with 170 GCs signing on to this message—sent an open letter to big law firms to say they will prioritize legal spend on firms that commit to diversity and inclusion; the letter expressed disappointment that the partners promoted at many of these firms are still “largely male and largely white” and “in no way reflect the demographic composition of entering associate classes.” By May 2019, an additional 60 GCs signed on to this letter and the initial author released a set of actionable items for GCs looking to execute the letter’s commitment, including the direct hire of diverse outside counsel and support for minority- and women-owned law firms.

While many GCs have close relationships with women- and minority-owned law firms to which they would like to send large matters, those firms may not yet have the capacity to take on larger engagements—a problem GCs can suggest these law firms solve with the hiring of elite contract attorneys for the pendency of the matter.

5. Filling Discrete Temporary Needs:  Corporate legal departments would benefit from hiring elite contract attorneys to fill temporary needs, for example when a member of the legal department goes on parental/medical/caregiver leave, or on an interim basis during the pendency of a search for a replacement GC or other departing member of the legal department. Expecting the legal department to cover these temporary needs without additional resources can lead to burn-out, reduced productivity, and errors. Elite contract attorneys are an excellent way to supplement the legal department for a short-term need.

Another good time to bring in elite contract attorneys is for the duration of a lawsuit or investigation—events that are out of the ordinary but can create a prolonged flurry of activity for a corporate legal department, detracting from the legal department’s ability to manage normal responsibilities. Bringing in one or more elite contract attorneys to assist the company’s outside counsel reduces both the actual expense of the litigation or investigation, as well as the secondary expense of reduced in-house productivity.

Contract attorneys are not a substitute for having a well-staffed legal department under the leadership of a GC, but as workflows fluctuate and required expertise varies, corporations will do well to strategically utilize the growing number of elite contract attorneys now at their disposal. If you are looking for information on hiring contract attorneys for your legal department, please reach out to me at .