Can a law firm lease its lawyers through an employee-leasing company whose fee is a portion of the lawyer's pay?

Plain-English summary

A national employee-leasing company leased employees to businesses, taking a percentage of gross payroll and handling group health and workers' compensation insurance, tax withholding, and FICA; in reality it performed only payroll administration and benefits. The company was not equipped to do conflict-of-interest determinations and took no confidentiality precautions, leaving both to the law firms using the service. The committee was asked whether a lawyer could be employed by such a company while working under a law firm's direction, whether a firm could lease lawyers to perform legal services under its direction, and whether lawyers leased by two different firms from the same company could represent adverse parties.

The committee adopted ABA Formal Opinion 88-356 (December 16, 1988) in its entirety (noting that prior SC Bar Advisory Opinion 84-26 applies only to temporary lawyers as defined in the ABA opinion). It assumed the lawyers are employees of the leasing company, not the firm, and that the company is not a law firm and has one or more non-lawyer equity owners. On that basis, using an employee-leasing company to obtain temporary lawyer services where the company's fee is a portion of the lawyer's compensation does not violate the Rules, as long as the lawyer's professional independence is maintained without interference by the company, the total fee charged each client by the firm is reasonable, and the arrangement otherwise follows the opinion's guidelines. So a lawyer may be employed by the leasing company while working under a firm's direction; a firm may lease lawyers to perform legal services under its direction; and lawyers leased by Firm A and Firm B from the same company may represent adverse parties without a conflict, if the lawyers and firms exercise care to avoid conflicts, maintain confidentiality, disclose the arrangement to clients in some circumstances, and comply with the other Rules.

Currency note

This opinion was issued in 1991, before the South Carolina Bar's adoption of the 2005 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 Treat this page as historical context, not current guidance.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 lawyer be employed by an employee-leasing company while working under a firm's direction?

A: The committee said yes, adopting ABA Formal Opinion 88-356, provided the lawyer's professional independence is maintained without company interference and the client's total fee is reasonable.

Q: Does the company taking a percentage of the lawyer's pay violate the fee rules?

A: The committee said no; using the leasing company where its fee is a portion of the lawyer's compensation does not violate the Rules so long as independence is preserved and the arrangement follows the ABA opinion's guidelines.

Q: Can lawyers leased by two different firms from the same company oppose each other?

A: The committee said yes, they may represent adverse parties without a conflict if the lawyers and firms take care to avoid conflicts, keep client information confidential, and disclose the arrangement where required.

Background and rules framework

The opinion interprets Rule 5.4 (professional independence of a lawyer), corresponding to Model Rule 5.4, alongside the conflict and imputation rules (Rules 1.7 and 1.10), by adopting ABA Formal Opinion 88-356 on temporary and leased lawyers. The controls are independence, reasonable client fees, conflict checking, confidentiality, and disclosure.

Citations and references

Rules of Professional Conduct:

• South Carolina RPC 5.4 / Model Rule 5.4: professional independence of a lawyer; a leasing company's fee may be a portion of the lawyer's compensation if independence is maintained.
• South Carolina RPC 1.7 / Model Rule 1.7 and RPC 1.10 / Model Rule 1.10: conflicts of interest and imputation among leased lawyers.

Other opinions cited:

• ABA Formal Opinion 88-356 (Dec. 16, 1988): temporary and leased lawyers (adopted in its entirety).
• SC Bar Advisory Opinion 84-26: applies only to temporary lawyers as defined in ABA Formal Opinion 88-356.

See also

• SC Bar Ethics Op. 91-04: A Lawyer Joining a Multi-Profession Estate-Planning Organization
• SC Bar Ethics Op. 91-32: Working With a Third-Party Counterfeit-Recovery Company

Source

• Landing page: https://www.scbar.org/for-lawyers/quicklinks/legal-resources/ethics-advisory-opinions/ethics-advisory-opinion-91-09/

Original opinion text

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

UPON THE REQUEST OF A MEMBER OF THE SOUTH CAROLINA BAR, THE ETHICS ADVISORY COMMITTEE HAS RENDERED THIS OPINION ON THE ETHICAL PROPRIETY OF THE INQUIRER’S CONTEMPLATED CONDUCT. THIS COMMITTEE HAS NO DISCIPLINARY AUTHORITY. LAWYER DISCIPLINE IS ADMINISTERED SOLELY BY THE SOUTH CAROLINA SUPREME COURT THROUGH ITS COMMISSION ON LAWYER CONDUCT.

Ethics Advisory Opinion 91-09

1. The leasing company is a national employee leasing company, which leases thousands of employees to businesses of all types across the country. It is paid a percentage of gross payroll calculated on a ratio of employees to volume of payroll and also provides group health and worker's compensation insurance, and withholds income taxes and FICA. The leasing company receives a payment based on the above formula for each employee in the program on a bi-weekly basis from the law firm and returns checks to the firm for distribution to employees on the first and fifteenth of each month. Bonus payments for the lawyers are also paid through the leasing company, but the leasing company's fee is a handling fee of a few hundred dollars per bonus distribution, rather than a percentage fee. All amounts paid as salary or bonus to the lawyers are determined solely by the law firm. The originator of the question has stated that in reality the leasing company performs only administration and aid to payroll generation, tax withholding and group insurance benefits.

2. The leasing company is not equipped to provide any conflict of interest determinations. Any precautions taken to avoid conflicts of interest would be by the law firms using the leasing service.

3. The leasing company does not take any precautions to insure confidentiality. The only such precautions are those undertaken by the law firms themselves, as the leasing company has no interaction with any employees of the law firm concerning client related matters.

Questions:

1. May a lawyer be employed by an employee leasing company but perform services under the direction and control of a law firm, which leases his services for the law firm?
2. May a law firm lease lawyers from an employee leasing company to perform legal services for the law firm under the direction and control of the law firm?
3. If FIRM A leases lawyers from an employee leasing company and FIRM B leases lawyers from the same employee leasing company, may those lawyers represent adverse parties in litigation without a conflict of interest?

Summary:
The Committee adopts the reasoning of ABA Formal Opinion 88-356, December 16, 1988, in its entirety, a copy of which is attached hereto and made a part hereof. (See also SC Bar Advisory Opinion 84-26 which only applies to temporary lawyers as defined in the ABA Opinion.)

Opinion:
The Committee adopts the reasoning of ABA Formal Opinion 88-356, December 16, 1988, in its entirety. (SC Bar Advisory Opinion 84-26 only applies to temporary lawyers as defined in ABA opinion.) It is assumed that the lawyers would be considered employees of the leasing company and not of the law firm for all purposes, including South Carolina law. It is further assumed that the employee leasing company is not a law firm and that it has one or more equity owners who are not lawyers. The use of an employee leasing company to obtain temporary lawyer services where the company's fee is a portion of the lawyer's compensation does not violate the Rules of Professional Conduct as long as the professional independence of the lawyer is maintained without interference by the company, the total fee by each client to the law firm is reasonable, and the arrangement otherwise is in accord with the guidelines in this opinion. 1. A lawyer may be employed by an employee leasing company to perform services under the direction and control of a law firm, which leases his services for the law firm. 2. A law firm may lease lawyers from an employee leasing company to perform legal services for the law firm under the direction and control of the law firm. 3. If FIRM A leases lawyers from an employee leasing company and FIRM B leases lawyers from the same employee leasing company, those lawyers may represent adverse parties in litigation without a conflict of interest, if the lawyers and the law firm exercise care, in accordance with the guidelines of this opinion, to avoid conflicts of interest, to maintain confidentiality of information, to disclose to clients the arrangement between the lawyer and the firm in some circumstances, and to comply with other applicable provisions of the Rules of Professional Conduct.