Can a law firm hire temporary (per diem) lawyers through a placement agency and pay the agency a percentage-based fee?

Plain-English summary

The inquirer proposed a lawyer-controlled corporation that would act as a placement agency, screening per diem ("temporary") lawyers for qualifications and conflicts and referring them to law firms, with the firms responsible for hiring, supervising, and clearing conflicts. The agency would be paid a separate fee, set as a percentage of the temporary lawyer's total remuneration. The Committee separated two questions: whether firms may hire temporary lawyers at all, and whether a firm may pay the agency a placement fee.

On the first question, the Committee found no prohibition against an attorney working for more than one firm, provided the Rules are observed. The harder issue was whether RPC 1.10 imputed disqualification applies to a given temporary lawyer, which it answered by adopting the functional analysis of ABA Formal Opinion 88-356: whether the temporary lawyer is "associated with" a firm depends on whether the lawyer has access to information about firm clients other than those on whose matters the lawyer works. The Committee directed firms to shield temporary lawyers from information about clients they do not work for, to keep complete records of each temporary lawyer's matters, and noted RPC 1.6 confidentiality follows the same access-based line. It also addressed RPC 7.5(d) disclosure, holding that whether a client must be told a temporary lawyer is working depends on the degree of supervision.

On the second question, the Committee held that the agency's percentage-based fee is compensation for placing a lawyer, not impermissible fee splitting under RPC 5.4, because the agency cannot influence the temporary lawyer's independent professional judgment and supervision rests entirely with the firm.

Currency note

This opinion was issued in 1989, before New Jersey's adoption of the 2004 revisions to the Rules of Professional Conduct. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule mentioned here.

Common questions

Q: Can a law firm hire per diem or temporary lawyers?

A: Per the opinion, yes. The Committee found "no legal or ethical prohibition against working for more than one law firm," provided the Rules of Professional Conduct are observed.

Q: When is a temporary lawyer "associated with" a firm for conflict-imputation purposes?

A: The Committee adopted ABA Formal Opinion 88-356's functional analysis: it depends on whether the temporary lawyer has access to information about firm clients other than those on whose matters the lawyer works, with the resulting risk of improper disclosure.

Q: Is paying a placement agency a percentage of the temporary lawyer's pay improper fee sharing?

A: No. The Committee concluded the fee is for the service of placing a lawyer; because the agency cannot interfere with the lawyer's independent judgment and supervision rests with the firm, RPC 5.4's objectives are not jeopardized.

Q: Must the firm tell the client a temporary lawyer is working on the matter?

A: Per the opinion, it depends on supervision. Disclosure is necessary where the temporary lawyer performs independent work without close supervision, but not where the lawyer works under close supervision of a firm lawyer.

Background and rules framework

The opinion applies NJ RPC 1.10 (imputed disqualification), RPC 1.6 (confidentiality of information relating to representation), RPC 1.7, 1.8, and 1.9 (conflicts), RPC 5.4 (professional independence; fee sharing with non-lawyers), and RPC 7.5(d) (statements implying a partnership or organization); the corresponding Model Rules are 1.10, 1.6, 1.7, 1.8, 1.9, 5.4, and 7.5. The Committee noted that interpretation of RPC 7.5 is outside its jurisdiction under R. 1:19-2 and addressed only the underlying policy. It relied heavily on ABA Formal Opinions 88-356 and 87-355.

Citations and references

Rules of Professional Conduct:

• MR 1.6 / NJ RPC 1.6 (confidentiality)
• MR 1.7, 1.8, 1.9 / NJ RPC 1.7, 1.8, 1.9 (conflicts of interest)
• MR 1.10 / NJ RPC 1.10 (imputed disqualification)
• MR 5.4 / NJ RPC 5.4 (professional independence; fee sharing with non-lawyers)
• MR 7.5 / NJ RPC 7.5(d) (implying a partnership or organization)

Court Rules:

• R. 1:19-2 (jurisdiction of the Committee)

Other opinions cited:

• ABA Formal Opinion 88-356 (temporary lawyers; functional analysis of association)
• ABA Formal Opinion 87-355 (fee sharing; professional independence)
• ACPE Opinion 469, 107 N.J.L.J. 113 (1981) (working for more than one firm)

See also

• NJ ACPE Op. 631: Attorney Leasing From an Employee Leasing Firm
• NJ ACPE Op. 740: Non-Legal Companies Furnishing Lawyers and UPL
• NJ ACPE Op. 689: Law Firm Retaining a Second Firm for Client Work

Source

• Full text (Justia mirror): https://law.justia.com/cases/new-jersey/advisory-committee-on-professional-ethics/2004/acp632-1.html
• Issuing authority: New Jersey Supreme Court Advisory Committee on Professional Ethics, via the NJ Courts Supreme Court Committees page

Original opinion text

Reproduced from a full-text mirror of the official opinion for research purposes. The linked official source controls.

124 N.J.L.J. 926, October 12, 1989

OPINION 632

Temporary Attorneys and Temporary Attorney Placement Agencies

The inquirer, a New Jersey attorney, proposes establishing a corporation exclusively controlled and managed by an attorney which would act as a recruiter or agent ("agency" or "placement agency") to assist law firms and sole practitioners ("law firms") in locating qualified per diem attorneys ("temporary lawyers") and assist temporary lawyers in securing per diem employment. According to the inquirer, the proposed corporation will operate as follows:

Agency will screen Temporary Lawyers for qualifications and possible conflicts of interest and refer appropriate Temporary Lawyers to Law Firms for consideration. Contracts between Agency and Law Firms will provide that (1) Law Firms are responsible for ultimate review and hiring of Temporary Lawyers; (2) Temporary Lawyers are employed directly by Law Firms as independent contractors; (3) Law Firms are responsible to disclose employment of Temporary Lawyers to client and obtain consent; (4) Law Firms are ultimately responsible for determining conflict of interest issues; (5) Law Firms are responsible for supervision of Temporary Lawyers; (6) Temporary Lawyers' remuneration rate will be established by Temporary Lawyers and agreed to by Law Firms; (7) Agency shall receive a separate fee, distinct from but based on a percentage of Temporary Lawyers' total remuneration, which shall be paid by Law Firms; (8) Law Firms shall issue separate checks for Temporary Lawyers' remuneration and Agency Fee.

The arrangement proposed by the inquirer further provides that temporary lawyers must disclose conflicts of interest to law firms. Before an assignment may be accepted, the agency will require temporary lawyers to sign and file a "Certification of No Conflicts" with the agency and law firms including appropriate waivers.

The inquirer asks whether the activities to be engaged in by the proposed agency are ethically permissible. Specifically, inquirer asks whether ethical rules related to (a) conflicts of interest, (b) confidentiality of client information, and (c) fee sharing render the proposed agency activities impermissible.

While the inquirer is concerned with the ethical propriety of operating a placement agency that receives a fee for placing temporary lawyers, before that question can be addressed it is necessary to determine whether the employment of temporary lawyers is permissible. Thus, two distinct issues are presented: (1) May law firms hire temporary lawyers? (2) May law firms pay fees to employment agencies for securing the services of temporary lawyers?

There is no legal or ethical prohibition against working for more than one law firm, even at the same time, provided there are no conflicts of interests and the attorney is not exposed to information in one firm that would be detrimental to the clients of the other. Opinion 469, 107 N.J.L.J. 113 (1981). Stated somewhat differently, there is no prohibition against an attorney working for more than one firm provided the Rules of Professional Conduct are observed. Similarly, an attorney may work as a temporary lawyer for one law firm and thereafter for another law firm provided the temporary lawyer and the law firms for which he or she is working comply with the Rules of Professional Conduct. The relevant inquiry, therefore, is to what extent the Rules of Professional Conduct apply to temporary lawyers.

With respect to conflicts of interest, any lawyer, including a temporary lawyer, and the law firm for which he is working, must adhere to the provisions of RPC's 1.7, 1.8 and 1.9. A temporary lawyer and the law firm for which he is working must also comply with the imputed disqualifications provisions of RPC 1.10, if applicable. The difficult question to resolve here, however, is whether RPC 1.10 is applicable to a particular temporary lawyer.

RPC 1.10 prohibits a law firm from representing a client in a number of situations in which any individual lawyer associated with that firm is prohibited from representing the client. Thus, if a temporary lawyer is deemed to be "associated with" the law firm, the law firm may be restricted or prohibited from representing those clients who the temporary lawyer is restricted or prohibited from representing. The touchstone is whether the temporary lawyer should be considered to be "associated with" the law firm. ABA Formal Opinion 88-356, at page 4, in discussing Model Rule 1.10 (upon which RPC 1.10 is based), states:

The question whether a temporary lawyer is associated with a firm at any time must be determined by a functional analysis of the facts and circumstances involved in the relationship between the temporary lawyer and the firm consistent with the purposes of the rule.

After discussing the factors involved in such a functional analysis, the Opinion concludes:

Ultimately, whether a temporary lawyer is treated as being "associated with a firm" while working on a matter for the firm depends on whether the nature of the relationship is such that the temporary lawyer has access to information of firm clients other than the client on whose matter the lawyer is working and the consequent risk of improper disclosure or misuse of information relating to representation of other clients of the firm. For example, a temporary lawyer who works for a firm, in the firm office, on a number of matters for different clients, under circumstances where the temporary lawyer is likely to have access to information relating to the representation of other firm clients, may well be deemed to be "associated with" the firm generally under R. 1.10 as to all other clients of the firm, unless the firm, through accurate records or otherwise, can demonstrate that the temporary lawyer has access to information relating to representation only of the certain other clients. If such limited access can be demonstrated, then the temporary lawyer should not be deemed to be "associated with" the firm under R. 1.10.... ABA Formal Opinion 88-356, supra. at 6. [Copyright by the American Bar Association. All rights reserved. Reprinted with permission].

We conclude, as did the ABA Committee, that in order to minimize the risk of imputed disqualification, firms employing temporary lawyers should shield such lawyers from all information relating to clients for whom the temporary lawyer does no work. Additionally, since the employment of temporary lawyers is very often likely to be on a short term basis and a law firm may have many temporary attorneys, it is incumbent upon law firms to maintain complete and accurate records of all matters on which each temporary lawyer does work. Since a temporary lawyer also has an interest in avoiding future imputed disqualification, the temporary lawyer should also maintain a record of all clients and matters with which he or she has been involved. Id. at 7. Furthermore, we stress that although the inquirer proposes that the placement agency would require that a "Certification of No Conflicts" be obtained, it is the responsibility of the law firms and the temporary lawyers, not the placement agency, to insure that there has been compliance with the Rules of Professional Conduct.

The access a temporary lawyer has to a law firm's files is also a critical factor to be considered in determining the scope of the application of RPC 1.6, which protects the confidentiality of client information and prohibits a lawyer from revealing "information relating to representation of a client" subject to the conditions set forth therein. The restrictions contained in RPC 1.6 do not require that the client information which must be kept confidential be gained from the professional relationship. Under RPC 1.6, a lawyer with a firm is prohibited from revealing information related to the representation of a client of the firm even though the lawyer's knowledge of the information was not gained from the representation of the client and even if the knowledge was acquired before or after the lawyer-client relationship existed.

As RPC 1.6 applies to temporary lawyers, where the temporary lawyer has access to information relating to the representation of clients other than the matters on which he is working, the temporary lawyer must not disclose information relating to the representation of persons he or she knows to be firm clients regardless of the source of the information. Where, however, the temporary lawyer has been screened from access to information relating to firm clients for whom the temporary lawyer is not working, the temporary lawyer's obligations under RPC 1.6 are limited to not revealing information relating to the representation of only those clients for whom the temporary lawyer has actually worked regardless of the source of the information as well as information relating to representation of other firm clients to the extent that it was gained as a result of working for the firm. ABA Formal Opinion 88-356, supra, at 8.

The inquirer has also raised the question of whether the employment of temporary lawyers violates RPC 7.5(d), which prohibits lawyers from stating or implying that they practice in a partnership or other organization when they do not. Although the interpretation of RPC 7.5 is not within this Committee's jurisdiction, R. 1:19-2, the policy underlying the rule is that a client in retaining a firm has selected the attorney or attorneys the client wants to represent him or her and is entitled to know who or what entity is undertaking that representation. A question, therefore, arises as to if and when the client must be told that a temporary lawyer is working on the matter.

The obligation of a law firm to advise its clients that a temporary lawyer will work on the client's matter depends upon the degree of supervision the attorney is receiving from the firm. Where the temporary lawyer is performing independent work for a client without the close supervision of a lawyer associated with the firm, disclosure to the client of the employment of the temporary lawyer would be necessary. Where, however, the temporary lawyer works under the close supervision of a lawyer associated with the firm, the firm would not have to disclose to the client that the temporary lawyer is working on the client's matter. ABA Formal Opinion 88-356, supra, at 10.

The inquirer has also asked whether the payment of a placement fee to the agency based on a percentage of the remuneration earned by the temporary lawyer is ethically permissible. Specifically, the inquirer questions whether payment of such a fee to an agency constitutes impermissible sharing of legal fees under RPC 5.4, which prohibits the sharing of legal fees with non-lawyers.

The compensation the agency is to receive is for providing the service of placing a lawyer who performs legal services. While the amount of compensation the agency receives for performing this service is tied to the amount paid to the temporary attorney, we are of the opinion that impermissible fee splitting does not result. The rationale underlying RPC 5.4 is to avoid the possibility of a non-lawyer being able to interfere with the exercise of a lawyer's independent professional judgment in representing a client and to insure that the total fee paid by a client is not unreasonably high. ABA Formal Opinion 87-355. We do not believe that these objectives will be jeopardized by the arrangement proposed by the inquirer. The agency has no ability to influence the manner in which the temporary lawyer performs his or her job for the law firm. Supervision of the temporary lawyer is entirely the responsibility of the law firm. Hence, the agency does not interfere with the temporary lawyer's independent professional judgement.

As with all advisory opinions, we have dealt solely with the ethical considerations, and have not addressed any substantive or regulatory considerations which may exist.