Can a lawyer work for a nonlawyer-owned company representing Social Security disability claimants and share the fees?

Plain-English summary

A lawyer asked about a proposal by a nonlawyer to start a company representing claimants in Social Security disability matters, an area in which federal regulations permit nonlawyers to appear. Under the proposal, the lawyer would be an employee and the company's manager, the nonlawyer would be the sole shareholder, the company would collect all fees, and the lawyer would receive a salary and profit-based bonuses. The lawyer asked whether this violated Rule 4-5.4 and whether the lawyer could separately practice law (including in federal district court) outside the company.

The committee began with Sperry v. State, which holds that federal law permitting nonlawyers to practice in specified areas preempts state restrictions only to the extent necessary to accomplish the federal objective; states otherwise retain control over the practice of law, so a state may apply its ethics rules to lawyers' arrangements with nonlawyers as long as it does not infringe the federal authorization. The committee noted that ethics authorities in other jurisdictions had generally disapproved this type of arrangement.

The committee then drew the key distinction: an activity that constitutes the practice of law does not stop being the practice of law just because nonlawyers may legally perform it. When a bar member who maintains a law practice or holds out as a lawyer represents Social Security disability claimants, the member is providing legal services for a legal fee, even though the matters could be handled by a nonlawyer. Under those circumstances, the Florida lawyer could not join with a nonlawyer to provide the services without running afoul of Rule 4-5.4.

Currency note

This opinion was issued in 1995, before The Florida Bar's adoption of the 2006 revisions to the Rules of Professional Conduct. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a Florida lawyer be an employee of a nonlawyer-owned company that handles Social Security disability claims?

A: Under this opinion, no, for a member who maintains a law practice or holds out as a lawyer; the fees are legal fees, so the arrangement would violate Rule 4-5.4's bar on sharing legal fees with a nonlawyer.

Q: Does it matter that nonlawyers are federally permitted to represent SSD claimants?

A: Per the opinion, an activity does not cease to be the practice of law simply because nonlawyers may legally perform it; when a lawyer who holds out as a lawyer does the work, it is the practice of law for a legal fee.

Q: Could the lawyer still practice law independently outside the company?

A: The committee's analysis turned on whether a member holding out as a lawyer could join with the nonlawyer in the company arrangement, which it found impermissible under Rule 4-5.4; the opinion is grounded in that fee-sharing prohibition.

Background and rules framework

The opinion applied Rule 4-5.4 (professional independence of a lawyer; prohibition on sharing legal fees with a nonlawyer; Model Rule 5.4), read against the federal-preemption framework of Sperry v. State and the federal regulations permitting nonlawyer representation in Social Security matters.

Citations and references

Rules of Professional Conduct:

• Model Rule 5.4 / Fla. Rule 4-5.4 (professional independence; fee-sharing with nonlawyers)

Cases:

• Sperry v. State of Florida ex rel. The Florida Bar, 373 U.S. 379 (1963), federal preemption and the practice of law

Statutes and regulations:

• 20 C.F.R. §§ 404.1705, 404.1720, 416.1505, 416.1520 (nonlawyer representation in Social Security matters)

Other opinions cited:

• Fla. Ethics Op. 65-4; ABA Informal Opinion 1241; Kansas Opinion 93-11; Indiana Opinion 6 of 1994; Maryland Opinion 84-92; Wisconsin Opinion E-84-4

See also

• FL Bar Ethics Op. 95-2: Affiliating With a Nonlawyer Securities-Arbitration Company
• FL Bar Ethics Op. 17-1: Fee Division With a Nonlawyer-Owned Out-of-State Firm
• FL Bar Ethics Op. 02-1: Nonlawyer Employee Bonus Based on Hours

Source

• Landing page: https://www.floridabar.org/etopinions/etopinion-95-1/
• Original PDF: https://www-media.floridabar.org/uploads/2017/04/FL-Bar-Ethics-Op-95-1.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

FLORIDA BAR ETHICS OPINION
OPINION 95-1
July 15, 1995
Advisory ethics opinions are not binding.
A Florida Bar member who maintains a law practice or otherwise holds himself or herself out as a lawyer may not ethically enter into a business arrangement with a nonlawyer to represent claimants in social security disability matters. Fees claimed by or paid to the bar member for such representation are considered legal fees, and thus the proposed arrangement would violate Rule 4-5.4, which prohibits a lawyer from sharing legal fees with a nonlawyer.
RPC: 4-5.4
Opinions: 65-4; ABA Informal 1241, Kansas 93-11, Indiana 6 of 1994, Maryland 84-92, Wisconsin E-84-4
Cases: Sperry v. State, 373 U.S. 379 (1963)
Misc.: Code of Federal Regulations sec. 404.1705, 404.1720, 416.1505, 416.1520

A member of The Florida Bar has requested an advisory ethics opinion regarding the following:

I have recently been approached by a non-attorney who wishes to start a business representing claimants in social security disability matters. The Code of Federal [R]egulations sections 404.1705 and 416.1505 allow for non-attorneys to represent claimants in these matters. The non-attorney has asked me to work for his company, and act as a claimant representative employed by his company. I would act not only as the representative but also as the management of the company. The non-attorney would be the sole shareholder in the company, but all management, and decisions concerning the representation of clients would be made by me.

The company would incur all costs associated with the representation and collect all fees resulting from it, as allowed by CFR sec. 404.1720 and 416.1520. I as an employee would receive a salary and bonuses based upon the profitability of the company. All work performed for the company would fit within the social security disability area, thus could be performed by non-attorneys.

The company would engage in some advertising but would not advertise the services of an attorney.

[1.] My question is, would this association of quasi-legal representation with the company violate Rule 4-5.4 of the Professional Rules of Conduct, or any other rule of conduct?

[2.] If the above discussed association does not violate a rule of conduct would I still be able to practice law independently of the company in areas other than social security? I the attorney would incur all expenses involved in the representation of clients and receive all fees resulting from that representation. The legal representation performed by me would be conducted from my office with the company but would have no other connection to the company.

[3.] Lastly, would I as an independent attorney be able to represent the company's clients in Federal District Court proceedings resulting from their social security claim? I the attorney would bear the court costs and expenses associated with the district court case and would receive any Equal Access to Justice Act fees that may result from this action.

As noted by the inquirer, federal legislation permits nonlawyers to practice in certain specified subject areas. States are preempted from enjoining conduct that Congress has expressly sanctioned by such legislation. Sperry v. State of Florida ex rel. The Florida Bar, 373 U.S. 379 (1963). Nevertheless, states "maintain control over the practice of law within [their] borders except to the limited extent necessary for the accomplishment of the federal objectives." Id. at 402. It therefore appears that a state may properly proscribe, by application of its ethics rules, activities by lawyers with nonlawyers as long as the proscription does not infringe on the authorization granted the latter by Congress. ABA Informal Opinion 1241. This conclusion is consistent with our Florida Ethics Opinion 65-4. Moreover, ethics authorities from other jurisdictions have generally disapproved the type of arrangement proposed above. See Kansas Opinion 93-11. See also, e.g., Indiana Opinion 6 of 1994; Maryland Opinion 84-92; Wisconsin Opinion E-84-4.

Additionally, it is important to note that a particular activity constituting the practice of law does not cease to be the practice of law simply because nonlawyers may legally perform it. ABA Informal Opinion 1241. When engaged in by lay persons, such activity is simply the authorized practice of law. Thus, it our opinion that members of The Florida Bar who, while maintaining a law practice or otherwise holding themselves out as attorneys, represent claimants in social security disability matters are providing legal services for which they are receiving a "legal" fee even though the matters may properly be handled by nonlawyers. See ABA Informal Opinion 1241. Under those circumstances, the Florida lawyer may not join with a nonlawyer to provide such services without running afoul of Rule 4-5.4.