Can a salaried lawyer who does outside legal work for a fee remit that fee to a non-lawyer employer, and how much may the employer keep?

Plain-English summary

A lawyer was salaried full-time by a multi-employer association whose principal function was representing member companies in collective bargaining. A multi-employer pension plan, a separate legal entity under federal law administered by union- and employer-selected trustees, had co-counsel chosen by each side. The employer trustees proposed to select the association's staff lawyer as one co-counsel, and because he drew a salary, he would remit the plan's legal fee to the association, a fee that might significantly exceed his salary for the time involved.

The committee first addressed a threshold conflict the inquirer had not raised, whether the lawyer could exercise independent judgment for the plan while also serving the association in collective bargaining. It concluded the dual role was consistent with DR 5-105, because the plan's trustees must administer it under ERISA, which overrides the conflict inherent in a fiduciary also being an officer of a party in interest, and because the employers, the association, and the plan ordinarily share an identical interest in lawful administration. It noted that in unusual circumstances, such as a hostile takeover, the interests could diverge and unaffiliated counsel would be needed.

On the fee, the committee held that even if the plan's fee was otherwise reasonable, remitting it to the association is improper if it amounts to sharing a legal fee with a non-lawyer. Relying on N.Y. County 670 (1989), it explained that a lay employer charging a third party more than its own cost for a salaried lawyer's services has been condemned on three grounds: sharing a legal fee with a lay person (DR 3-102(A)), aiding the unauthorized practice of law (DR 3-101(A)), and misrepresenting as "attorneys' fees" an amount unrelated to the lawyers' compensation (DR 1-102(A)(4)). The evil arises whenever the lay agency earns a profit from its salaried lawyer's legal services. The remittance must therefore be calculated not to exceed fair reimbursement of the association's costs, which may include an allocated share of salary and customary overhead; remitting more would violate DR 3-102(A).

Currency note

This opinion was issued in 1991, under New York's former Code of Professional Responsibility, which New York replaced with the Rules of Professional Conduct in 2009. The provisions on sharing fees with non-lawyers, the unauthorized practice of law, and misrepresentation cited here have since been recast in Rules 5.4, 5.5, and 8.4. 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 salaried lawyer remit an outside legal fee to a non-lawyer employer?

A: Yes, but only up to the employer's actual cost of providing the lawyer's services, an allocated portion of salary and overhead. The committee held that remitting any amount above that cost is improper fee sharing under DR 3-102(A).

Q: Why is remitting the full fee a problem?

A: Because, per N.Y. County 670, a lay employer profiting from its salaried lawyer's services has been condemned as sharing a legal fee with a non-lawyer (DR 3-102(A)), aiding unauthorized practice (DR 3-101(A)), and misrepresenting "attorneys' fees" (DR 1-102(A)(4)).

Q: Could the lawyer serve both the association and the pension plan?

A: Yes. The committee found the dual role consistent with DR 5-105, because ERISA overrides the inherent fiduciary conflict and the parties generally share an interest in lawful administration; unusual circumstances like a takeover would require unaffiliated counsel.

Background and rules framework

The opinion applied DR 3-102(A) (sharing legal fees with a non-lawyer), DR 3-101(A) (aiding the unauthorized practice of law), and DR 1-102(A)(4) (misrepresentation), along with DR 5-105 for the threshold conflict. The closest Model Rule analogues are Rule 5.4 (professional independence; sharing fees with non-lawyers), Rule 5.5 (unauthorized practice), and Rule 8.4(c) (dishonesty or misrepresentation).

Citations and references

Rules of Professional Conduct:

• MR 5.4 (professional independence; sharing fees with non-lawyers)
• MR 5.5 (unauthorized practice of law)
• MR 8.4(c) (misrepresentation)
• NY DR 3-102(A); DR 3-101(A); DR 1-102(A)(4); DR 5-105

Statutes:

• Employee Retirement Income Security Act, 29 U.S.C. sections 1101-12 (trustee fiduciary duties)

Other opinions cited:

• N.Y. County 670 (1989): a lay employer may not profit from a salaried lawyer's services
• ABA Formal Op. 88-356 (1988): fee sharing and temporary-lawyer placement

See also

• NY State Bar Op. 633: A firm fronting for a non-lawyer debt-consolidation service
• NY State Bar Op. 625: A 900-number legal message line and form-document fees

Source

• Landing page: https://nysba.org/opinion-618/