NYSBA 2011-11-15

Can a New York law firm pay a non-lawyer marketer a bonus based on the new business they bring in?

Short answer: A firm may employ a non-lawyer marketer who does only the advertising and solicitation a lawyer could do, and may pay a profit-sharing bonus tied to overall firm profits or a percentage of base salary; the bonus may not be tied to particular referrals or to a department's profits where those profits are substantially related to the employee's marketing.

Disclaimer: Advisory only. Not binding precedent.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official ethics opinion. The original opinion (linked at the bottom of this page) is the authoritative source for any reliance.

NY State Bar Ethics Opinion 887: Non-Lawyer Marketer Bonus Pay

Short answer: A law firm may employ a non-lawyer marketer who engages in only the advertising and solicitation a lawyer could lawfully do, and may pay that marketer a profit-sharing bonus based on overall firm profits or a percentage of base salary, but not a bonus tied to particular referrals or to the profits of a department whose profitability is substantially related to that marketer's efforts.

Disclaimer: This is an advisory ethics opinion. Advisory opinions are not binding; they interpret the New York State Bar Association's rules of professional conduct and are persuasive authority. This summary is for research purposes only and is not legal advice. Verify current rules before acting on any specific guidance.

About this page: The plain-English summary and Q&A below were written by Ezel based on the official opinion. We do not reproduce the opinion text on this page; follow the linked source for the official text, which controls.

View original opinion

Plain-English summary

A law firm wished to hire a non-attorney marketer to promote its pre-paid legal services plans to potential corporate and union clients, and asked whether the marketer could be paid more than a salary, such as a success fee for signing up plan sponsors (paragraph 1).

The committee began with the scope of what a marketer may do. A lawyer may disseminate advertising about the firm and its services, and may hire an employee to carry out advertising and solicitation activities the lawyer could ethically perform, such as developing print or web materials. But the marketer may not do anything the lawyer could not do: Rule 8.4(a) bars a lawyer from violating the rules through the acts of another, and Rule 5.3(b) makes the lawyer responsible for an employee's conduct that would violate the rules. So while preparing written advertising (properly labeled "Attorney Advertising" and pre-approved by the firm) raises no issue even when addressed to particular persons, the marketer could not make in-person or telephone solicitation calls to acquaintances who are not close friends, clients, or former clients, because that would violate Rule 7.3(a)(1) (paragraphs 2 through 7).

On compensation, Rule 5.4(a) bars sharing legal fees with a non-lawyer, with limited exceptions. Rule 5.4(a)(3) permits compensating a non-lawyer employee based in whole or in part on a profit-sharing plan, but Comment 1B explains that such sharing must be based on the total profitability of the firm or of a department, and may not be based on the fee from a single case. That exception does not override Rule 7.2's bar on paying a person to recommend the lawyer's employment or rewarding a recommendation that results in employment. Citing N.Y. State 733 (2000), the committee reiterated that a lawyer may not pay a non-lawyer employee a percentage of fees attributable to matters the employee referred (paragraphs 8 through 10).

Applying these rules, the committee held that a firm may pay a marketing employee a bonus that is not based on particular referrals but on the profitability of the entire firm or a department. The success of marketing efforts may be a factor in the bonus amount, but where a department's profits are directly related to the employee's own marketing, paying a bonus on that department's profits would be difficult to distinguish from a direct sharing of legal fees. Whether a given plan crosses that line is fact-specific and depends on the size of the department and how much of its profit traces to clients the employee's marketing produced (paragraph 11).

In practice

The opinion holds that, under the New York rules as they stood at the time, a firm may employ a non-lawyer marketer confined to the advertising and solicitation a lawyer could lawfully do, and may pay a profit-sharing bonus keyed to overall firm profits or to a percentage of the employee's base salary. The committee drew the limiting line at two points: the bonus may not be based on referrals of particular matters (Rule 7.2 and N.Y. State 733), and it may not be based on the profits of a department whose profitability is substantially related to that employee's marketing efforts, because that would resemble a direct sharing of legal fees barred by Rule 5.4(a). The committee characterized the dividing line as fact-specific, turning on the size of the department and the degree to which its profits trace to the employee's marketing.

Common questions

Q: Can I pay my non-lawyer marketer a bonus on top of salary?

A: Yes, within limits. Rule 5.4(a)(3) permits a profit-sharing bonus based on the firm's overall profits or a percentage of base salary; it may not be based on a single case's fee or on particular referrals (paragraphs 8, 11).

Q: Can the bonus be tied to how much business the marketer brings in?

A: Not directly. A bonus tied to particular referrals is barred by Rule 7.2, and a bonus on a department's profits where those profits are substantially related to the employee's own marketing would be treated as impermissible fee sharing under Rule 5.4(a) (paragraphs 9 through 11).

Q: What marketing activities can a non-lawyer marketer actually do?

A: Only what a lawyer could do. Preparing written advertising, even targeted letters, is fine if labeled and firm-approved; but the marketer may not make in-person or telephone solicitation calls except to close friends, clients, or former clients, because Rule 7.3(a)(1) would bar the lawyer from doing so (paragraphs 4 through 7).

Q: Is the firm responsible if the marketer crosses a line?

A: Yes. Rule 8.4(a) bars achieving a violation through another's acts, and Rule 5.3(b) makes the lawyer responsible for a non-lawyer employee's conduct that would violate the rules (paragraph 5).

Background and rules framework

The opinion interprets New York Rule 5.4(a) and 5.4(a)(3) (sharing legal fees with non-lawyers and the profit-sharing exception), Rule 7.2 (paying for recommendations), Rule 7.3(a)(1) (the in-person and real-time solicitation bar), and Rule 8.4(a) and Rule 5.3(b) (responsibility for the acts of non-lawyers), corresponding to ABA Model Rules 5.4, 7.2, 7.3, and 8.4. It also draws on the Rule 1.0(a) definitions of advertisement and solicitation.

Citations and references

Rules of Professional Conduct:

MR 5.4 / NY Rule 5.4(a), 5.4(a)(3): sharing legal fees with non-lawyers; the profit-sharing-employee exception
MR 7.2 / NY Rule 7.2: paying a person to recommend the lawyer's employment
MR 7.3 / NY Rule 7.3(a)(1): bar on in-person and real-time solicitation
MR 8.4 / NY Rule 8.4(a): violating the rules through the acts of another
NY Rule 5.3(b): responsibility for a non-lawyer employee's conduct
NY Rule 1.0(a): definitions of advertisement and solicitation

Cases:

Shapero v. Kentucky Bar Association, 486 U.S. 466 (1988), targeted-letter advertising to persons known to need the lawyer's services

Other opinions cited:

N.Y. State 733 (2000): a lawyer may not pay a non-lawyer employee a percentage of fees attributable to matters the employee referred

Source

Landing page: https://nysba.org/ethics-opinion-887/