Can a law firm hire a lawyer through a nonlawyer staffing agency, and how do conflicts, confidentiality, fee-sharing, disclosure, and billing apply?
Apply this to your situation
This page answers the general question as of 1998. Ezel answers yours: whether it's allowed on your facts, under the current Virginia Rules of Professional Conduct, with citations.
Plain-English summary
A staffing agency recruited, screened, and placed lawyers ("Lawyer Temps") with firms and corporate law departments for short-term projects, paying them an hourly rate and billing the firm at that rate plus a markup, without controlling the temp's professional judgment, and requiring that a firm lawyer supervise the temp. The committee was asked whether such arrangements are permissible and how the disciplinary rules apply to the agency, the temp, and the hiring firm. The committee concluded the arrangement is permissible and, surveying authority nationwide, addressed each issue in turn.
On conflicts, a Lawyer Temp who works on a firm's client matters "represents" those clients for conflict purposes, and the temp's personal conflicts are treated like those of any lawyer switching firms (DR 5-105). The hiring firm and the temp must screen for conflicts with current and former clients, keeping records of matters worked on. Whether a temp is "associated with" the firm for imputed disqualification (DR 5-105(E)) is fact-intensive and turns on the temp's access to client confidences and secrets: broad access to a firm's files raises a presumption that confidences were acquired, while a single matter under close supervision may rebut it. Screening ("Chinese Wall") does not cure a conflict where the temp actively participated in a matter for an adverse client, absent client consent. The temp and firm must protect client confidences under DR 4-101, and the agency may not cause the temp to breach confidentiality or be told the subject matter of the work.
On fees and disclosure, the committee held the agency's charge is not improper fee-sharing with a nonlawyer under DR 3-102: the agency is paid for recruiting and placing the temp, not for legal services, and the temp receives full compensation for his work. The firm need not disclose a Lawyer Temp's involvement to the client when the temp works under the direct supervision of a firm lawyer (the temp's work is the firm's work), though disclosure is required where the temp works independently or the client specified a particular lawyer. On billing, the firm may pass the cost through as a disbursement, in which case the amount shown must be what was actually paid and any markup must be disclosed, or it may bill for the temp's services as it would a salaried associate's, at a reasonable fee, without disclosing the pay arrangement. Finally, the agency may not interfere with the temp's independent professional judgment, and the temp must decline assignments outside his competence (DR 6-101(A)).
Currency note
This opinion was issued in 1998, under Virginia's former Code of Professional Responsibility (the disciplinary rules it cites), before the Virginia State Bar's adoption of the Rules of Professional Conduct effective January 1, 2000. 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 or requirement mentioned here.
Common questions
Q: Can a Virginia firm hire a lawyer through a temp staffing agency?
A: Under this 1998 opinion, yes. The committee held the arrangement is ethically permissible, subject to the disciplinary rules, and treated hiring a temp like hiring a lawyer from another firm.
Q: Is paying the staffing agency improper fee-sharing with a nonlawyer?
A: No. The committee held the agency is paid for recruiting and placing the temp, not for legal services, and the temp receives full compensation for his work, so DR 3-102 is not violated.
Q: Does the firm have to tell the client a temp is working on the matter?
A: Not when the temp works under the direct supervision of a firm lawyer, because the temp's work is the firm's work. Disclosure and consent are required if the temp works independently or the client specified a particular lawyer.
Q: Can the firm bill the client more for the temp than it pays the agency?
A: Yes. The firm may bill for the temp's services as it would a salaried associate's at a reasonable fee without disclosing the pay arrangement; if instead it passes the cost through as a disbursement, the amount must be the actual cost and any markup must be disclosed.
Background and rules framework
The opinion was decided under Virginia's former Code of Professional Responsibility: DR 5-105 and DR 5-105(E) (conflicts and imputed disqualification), DR 4-101 (confidences and secrets), DR 3-102(A) (fee-sharing with a nonlawyer), DR 2-105 (reasonable and explained fees), DR 5-106 and EC 5-23 (independent judgment when paid by a third person), and DR 6-101(A) (competence). The modern analogues include Rule 1.10, Rule 1.6, Rule 5.4, and Rule 1.5. It relies heavily on ABA Formal Op. 88-356.
Citations and references
Rules of Professional Conduct:
- Former Virginia DR 5-105 and DR 5-105(E), DR 4-101, DR 3-102(A), DR 2-105, DR 5-106, DR 6-101(A); EC 5-23 (Code of Professional Responsibility)
Other opinions cited:
- Virginia LEOs 1300, 1147, 1419, 1428, 1629, 1648, 1659: client-identity confidentiality, lateral-lawyer conflicts, and billing markups.
- ABA Formal Ops. 88-356 (1988), 93-379 (1993), 96-400 (1996); sister-state opinions on temporary lawyers.
See also
Source
- Landing page: https://vsb.org/Site/about/rules-regulations/leo-opinions.aspx
- Original PDF: https://www.vsb.org/common/Uploaded%20files/LEOs/1712.pdf
Original opinion text
Reproduced from the official source for research purposes. The linked source is authoritative.
Committee Opinion
July 22, 1998
LEGAL ETHICS OPINION 1712
TEMPORARY LAWYERS WORKING
THROUGH A TEMPORARY
PLACEMENT SERVICE.
You have presented a hypothetical situation in which a staffing agency recruits, screens
and interviews lawyers (“Lawyer Temps”), then places them with law firms or corporate
law departments to practice law on short-term projects. The staffing agency places
Lawyer Temps on its payroll and pays them an hourly rate (deducting all appropriate
taxes and paying all required payroll taxes) during their work on the temporary
assignments. The staffing agency then bills the law firm and/or law department for that
rate, plus a mark-up that covers the staffing agency's overhead and profit. The staffing
agency is careful to match the lawyer's skill and experience to the practice needs of the
law firm or corporate law department requesting a Lawyer Temp. The staffing agency
does not, however, assert any control over the Lawyer Temp's exercise of his/her
professional and legal judgment while he/she is working on the assignment. Moreover,
the staffing agency's contract with the law firm or the corporate law department requires
that the Lawyer Temp be supervised by a lawyer associated with the firm or the corporate
law department.
Initially, you inquired whether it is ethically permissible for a lawyer to enter into an
agreement with a staffing agency under which the agency places the lawyer with law
firms or corporate legal departments to practice law on short-term assignments. You have
also made some specific inquiries concerning the ethical duties of the staffing agency, the
Lawyer Temp, and the hiring law firm or corporate law department.
The Committee recognizes the increasing utilization of Lawyer Temps by law firms
and corporate law departments to meet temporary or unusual staffing needs or to provide
special expertise not possessed by other lawyers associated with the firm or corporate law
department. May a lawyer enter into an agreement with a staffing agency that places
him/her with a law firm or a corporate law department, and may the law firm or corporate
entity hire such a temporary lawyer? The Committee believes that such an arrangement is
ethically permissible subject to compliance with applicable disciplinary rules. Though not
entirely in agreement on all ethical issues and duties arising out of the relationship, all
legal authorities found by the Committee have approved a law firm's use of a Lawyer
Temp. Alaska Bar Ass'n Ethics Op. 96-1 (1996); Supreme Court of Texas Professional
Ethics Committee Op. 515 (1996); California State Bar Ethics Op. 1992-126 (1992);
Supreme Court of Ohio, Bd. Of Commissioners of Grievances & Discipline Op. 90-23
(1990); New Jersey Supreme Court Advisory Committee on Professional Ethics Op. 632
(1989); Oliver v. Bd. Of Governors, Kentucky Bar Ass'n., 779 S.W.2d 212 (Ky. 1989);
City of New York Bar Ass'n Formal Op. 1989-2 (1989); Florida State Bar Ass'n Op. 8812 (1988); ABA Formal Op. 88-356 (1988).
This Committee has previously opined that there is no prohibition against a lawyer
having dual separate law practices. Virginia Legal Ethics Opinion 1659, LE Op. 1659. A
lawyer licensed in Virginia may be an associate of two or more firms for the practice of
Committee Opinion
July 22, 1998
law. Virginia Legal Ethics Opinion 802, LE Op. 802. Therefore, it would be ethical for a
licensed Virginia lawyer to serve as a Lawyer Temp for more than one law firm or
corporate law department. However, the parties to such an arrangement have a number of
ethical issues to address, many of which are raised in your inquiry.
Based on the facts you have presented, you have asked the Committee to opine as to the
following:
- What are the obligations of the staffing agency, the Lawyer Temp, and/or the law
firm to avoid conflicts of interest in accordance with DR:5-105?
A Lawyer Temp placed by a staffing agency with a law firm to work on particular
matters for clients of that firm “represents” the firm's clients for purposes of DR:5-105.
ABA Formal Op. 88-356. DR:5-105 addresses the representation of multiple clients with
conflicting interests and the representation of a client in a matter substantially related to
the representation of a former client. A Lawyer Temp may work on a single matter for a
law firm or may work generally for the firm for a limited period on a number of different
matters. A Lawyer Temp assigned by a staffing agency to a law firm may simultaneously
perform work for clients of other law firms to which the Legal Temp is assigned. In each
instance, the Lawyer Temp may face situations where he/she is assigned to matters in
which clients of the law firms have conflicting interests. DR:5-105(A), (B). Moreover,
even if the Lawyer Temp has no assignments with other law firms pending, he or she
must avoid accepting assignments with a law firm that are “substantially related” to any
matters handled for clients of his/her former law firm if the interests of the current client
conflict with those of the former client, unless the former client consents after full
disclosure. DR:5-105(D). The personal conflicts of Lawyer Temps are treated as if they
are conflicts of the law firm's regular professional staff.
The Committee reviewed several opinions advising that in order to avoid conflicts of
interest, the law firm and the Lawyer Temp should each keep records of the matters
worked on during the period of the assignment. A recent article in ABA Litigation News
reported that one Lawyer Temp placement agency requires each lawyer to keep a log
containing the names of all the Lawyer Temp's former clients for whom the lawyer
worked either as a law firm employee or as a Legal Temp. The placement agency does
not review the log but makes it available to placement employers. 23 ABA Litigation
News 5 (No. 3 Mar. 1998). Prior to hiring a Lawyer Temp, the law firm and the Lawyer
Temp should meet to determine that there will be no conflicts between the Lawyer
Temp's past placements or employment and the law firm's proffered placement. See
California State Bar Standing Committee on Professional Responsibility and Conduct
Formal Opinion Number 1992-126, 1992-WL 166234. In this regard, the situation is like
that of a lateral transfer interviewing or negotiating for a position with a new law firm.
See, e.g., ABA Formal Op. 96-400 (1996).
ABA Formal Opinion 88-356 advises that a Lawyer Temp should not be placed with a
law firm that represents a party adverse to a client of the Lawyer Temp or a former client
of the Lawyer Temp in a “substantially related” matter. ABA Opinions 88-356 and 96-
Committee Opinion
July 22, 1998
400 impose obligations on both the hiring law firm and the lawyer seeking placement to
screen for possible conflicts. The law firm that is negotiating to hire the Lawyer Temp
must make inquiry of the extent to which the Lawyer Temp was involved with the
representation of an adverse party. Otherwise, the placement of the Lawyer Temp may
result in the firm's disqualification from representing a client adverse to a client then or
formerly represented by the Lawyer Temp. The Lawyer Temp and the law firm must be
able to have substantive discussions about current and former clients of the Lawyer Temp
in his/her other placements. If the Lawyer Temp is aware that the law firm with which
he/she is seeking placement represents a client in a matter adverse to a client for whom
the Legal Temp worked or works with another law firm, the Lawyer Temp would need to
consult with his/her client to determine whether and to what extent the Lawyer Temp
could disclose information about the client and the subject of the representation to
lawyers conducting the interview and negotiations for the hiring firm.
Exactly how the ABA opinions expect “an appropriate inquiry” and “screening for
conflicts” to occur in all situations is unclear. Even the identity of clients and the subject
of their legal matters may be entitled to confidentiality under DR:4-101 as client secrets.
Virginia Legal Ethics Op. 1300, LE Op. 1300 (1989). This Committee has previously
opined, however, that it would not be improper to reveal the identity of a former client in
order to cure a possible conflict of interest where the former client is the opposing
counsel in a pending matter and such information needed to be disclosed to the current
client to obtain consent. Virginia Legal Ethics Op. 1147, LE Op. 1147 (1989). The
Committee has also opined that once the fact of representation of a client is a matter of
public record, then disclosure of the mere fact of such representation would not violate
DR:4-101 unless the client has requested such information to remain confidential or the
disclosure of such information would be detrimental or embarrassing to the client. Id.
Hence, the Lawyer Temp's disclosure of his/her current or former clients on
assignments with other law firms is tested by DR:4-101(A)'s definition of a “secret.” It is
“information gained in the professional relationship [which includes the fact of the
representation] that the client has requested be held inviolate or the disclosure of which
would be embarrassing or would be likely to be detrimental to the client.” If the Lawyer
Temp's current or former client does not request him/her or the law firm to hold the fact
of representation in confidence, and if the Lawyer Temp reasonably determines that
disclosure of the fact of representation would not be embarrassing to the client or would
not likely be detrimental to the client's interests, then the Lawyer Temp may include such
clients in his/her client log for disclosure to another hiring law firm without client
consent. The committee cautions, however, that a client's request that information gained
“be held inviolate” is a function of inquiry of the client. The broad public perception is
that information gained by lawyers is confidential. Indeed, lawyers foster that perception.
Thus, the client's failure to exact an affirmation of confidentiality, or to instruct the
lawyer to hold information inviolate, does not permit the lawyer to assume without
inquiry that the client consents to disclosure of the fact of representation to third persons.
Client consent permits disclosure of confidences and secrets under DR:4-101(C)(1), but
the consent contemplated is a meaningful one that entails the lawyer's disclosure to the
client of the significance and ramifications of revealing confidences and secrets.
Committee Opinion
July 22, 1998
There are two practical considerations for Lawyer Temps. First, if the Lawyer Temp
concludes that client consent to disclosure is not necessary under DR:4-101(B), the
Lawyer Temp should confirm his conclusion with the law firm with which he/she worked
or works for those clients. It seems fair to say that the client would have a more intimate
relationship with the law firm than with the Lawyer Temp assigned to work on the
client's matter. The Lawyer Temp thus can be guided by the law firm's perception or
informed judgment of the client's desires as to disclosure of the fact of the Lawyer
Temp's representation.
The second practical consideration is that whether the Lawyer Temp is permitted to
disclose the fact of representation of a client should be addressed at the outset of the
placement with the law firm. The risk of wrongful disclosure could be minimized if each
of the Lawyer Temp's hiring law firms made a disclosure to clients for whom he/she
would work, explained that the nature of transitory placement with law firms required the
Legal Temp to maintain a client log, and requested consent to inclusion of the client's
name in the Lawyer Temp's log. If a client objects to disclosure of the fact of the Lawyer
Temp's representation, the Lawyer Temp acts at his/her peril under DR:4-101 in
disclosing the fact of the client's representation. Likewise, the hiring law firm acts at its
peril under DR:5-105 if it fails to assess the possibility of conflicts of interests between
clients.
In those situations where an exchange of information between the Lawyer Temp and
the hiring firm is not permitted with respect to identification of current or former clients
of the Lawyer Temp, the Lawyer Temp must be cognizant of conflicts of interest and
decline employment when required to do so under the applicable rules. In effect, the
personal conflicts of a Lawyer Temp are to be analyzed and resolved in the same manner
as the personal conflicts of any lawyer switching firms. LE Op. 1419, LE Op. 1428, LE
Op. 1430 and LE Op. 1629. Both the Lawyer Temp and the lawyers hiring the Lawyer
Temp would be barred from representing any party adverse to any client in whose legal
matter the Lawyer Temp has “actively participated,” or from whom the Lawyer Temp
gained confidences and secrets, unless the clients consent after full disclosure. DR:5-105;
Legal Ethics Opinion 1428, LE Op. 1428.
- Is the Lawyer Temp considered “associated with” the firm for the purposes of the
imputed disqualification provision of DR:5-105(E)? What steps can be taken so that
a temporary attorney is not deemed “associated with” the firm?
The most difficult conflict of interest issues involving Lawyer Temps turn on whether
the Lawyer Temp is considered “associated with” the hiring firm for purposes of the
“imputed disqualification” rule under DR:5-105(E), which states:
If a lawyer is required to decline employment or to withdraw from employment under
DR:5-105, no partner or associate of his or her firm may accept or continue such
employment.
Committee Opinion
July 22, 1998
For example, suppose a Lawyer Temp is working on a legal matter for Firm X which
represents Client A, and the staffing agency assigns the Lawyer Temp to work for Firm Y
which represents A's adversary, B. Must the Lawyer Temp withdraw from representing A
unless A consents to Firm Y's employment of the Lawyer Temp? If Client A objects, can
Firm Y still continue its representation of B? Can Firm Y effectively “screen” the Lawyer
Temp from its representation of B so that the conflict is curable? If the Lawyer Temp did
not work on any matters for Client A while employed at Firm X, may firm Y hire the
Lawyer Temp and continue to represent Client B?
Categorical answers cannot be given to those questions. DR:5-105(E) must be applied
on a case-by-case basis after consideration of the particular circumstances and facts. A
key factor in the consideration consists of the extent to which confidentiality is protected,
which implicates the Lawyer Temp's access to client confidences and secrets as defined
in DR:4-101(A).
For guidance, the Committee turns to some of its prior opinions involving lawyers
moving laterally from one firm to another since those opinions analyze similar issues
regarding protection of client confidences and secrets and imputed conflicts. In Legal
Ethics Opinion 993, LE Op. 993, the Committee addressed a situation in which a lawyer
left a law firm to establish his own practice and desired to represent a plaintiff in an
existing case in which the defendant was represented by a partner in his old law firm.
Since the lawyer was not involved in the case while at his old law firm, the Committee
concluded the lawyer had rebutted any presumption that he had acquired confidential
information from or about the client while employed at his old firm.
In Legal Ethics Opinion 1428, LE Op. 1428, a lawyer in a medical malpractice defense
law firm made a lateral transfer to join a law firm that prosecuted plaintiffs' claims of
medical malpractice. The Committee opined that absent client consent, both the lawyer
and his new firm would be barred from representing any plaintiffs in matters in which the
lawyer was “actively participating” while employed at the defense firm. In that situation,
a screening device (“Chinese Wall”) would not cure the conflict absent client consent.
The lawyer and others in the plaintiff's law firm could represent clients whose interests
were adverse to clients of the defense firm if the lawyer switching firms did not work on
those cases and did not acquire any former client confidences and secrets. See also Legal
Ethics Opinion 1629, LE Op. 1629. Therefore, if a lawyer while with one firm acquired
no confidential information relating to a particular client of the firm and did not
participate in the firm's representation of the client, neither the lawyer individually nor
any member of the second firm is disqualified from representing a client in the same or a
related matter even if the interests of the two clients conflict.
If a Lawyer Temp was directly involved in work on a matter for a client of one law
firm, thereby acquiring confidences and secrets relating to the representation of that
client, a second law firm representing an adverse client in the same or a substantially
related matter should not hire that Lawyer Temp, at least until the pending matter is
concluded, without consent from the former client of the Lawyer Temp. In that situation,
even if the Lawyer Temp was assigned to the second law firm to work on matters
Committee Opinion
July 22, 1998
unrelated to his work at the former firm, absent the consent of the clients whose interests
conflict, DR:5-105(E) would disqualify the second law firm from continuing its
representation of a client whose interests were adverse to the client of the first law firm.
The risk of imputed disqualification for the hiring firm also depends on the Lawyer
Temp's access to confidences and secrets of clients represented by other law firms even if
the Lawyer Temp did not perform work for those clients.
If the Lawyer Temp works for a law firm, in its office, on a number of matters for
different clients and has general access to the law firm's files and to office discussions of
client matters, there will likely be a presumption that the Lawyer Temp acquired
confidences and secrets. Such a presumption is not likely, or is more readily rebutted,
where the Lawyer Temp worked on a single matter outside the law firm's office, or under
such close supervision that it can be demonstrated the Lawyer Temp did not have access
to confidential information about other law firm clients. Law firms hiring Lawyer Temps
should maintain adequate records and documentation demonstrating restricted access to
client files and confidential information. Even so, the second law firm's “screening” of a
Lawyer Temp who “actively participated” in the representation of one client adverse to a
client of the law firm will not cure the conflict and is not a substitute for client consent.
Legal Ethics Opinion 1428, LE Op. 1428, supra.
The Standing Committee on Legal Ethics for the American Bar Association takes the
position that Lawyer Temps should not necessarily be treated as “associated” with the
law firm that hires them for purposes of imputed disqualification. Applying a “functional
analysis” test, the ABA committee focused on a direct connection between the Lawyer
Temp and the work he/she performed for clients with conflicting interests. ABA Formal
Op. 88-356. Applying the Model Rules of Professional Conduct and the Code of
Professional Responsibility, the ABA committee concluded that ordinarily screening is
permissible for Lawyer Temps moving from firm to firm:
In order to minimize the risk of disqualification, firms should, to the extent
practicable, screen each Lawyer Temp from all information relating to clients for
which the Lawyer Temp does not work. All law firms employing Lawyer Temps also
should maintain a complete and accurate record of all matters on which each Lawyer
Temp works. A Lawyer Temp working with several firms should make every effort to
avoid exposure within those firms to any information relating to clients on whose
matters the Lawyer Temp is not working. Since a Lawyer Temp has an equal interest
in avoiding future imputed disqualification, the Lawyer Temp should also maintain a
record of clients and matters worked on.
The committee concurs with the precautions suggested in ABA Formal Op. 88-356 to
avoid a disqualifying conflict of interest. The committee observes that authorities in other
jurisdictions have done likewise. Oliver v. Board of Governors, 779 S.W.2d 212, 216
(Ky. 1989); New Jersey Op. 632. (1989); and South Carolina Op. 91-09 (1991). The
Committee cautions, however, that the screening measures recommended in ABA Formal
Op. 88-356 will not always be practical or possible, and that the efficacy of screening
Committee Opinion
July 22, 1998
(the “Chinese Wall”) cannot be guaranteed in the light of the Virginia Supreme Court's
disapproval of Legal Ethics Opinion 1302, LE Op. 1302. See Building Chinese Walls in
Virginia, etc., 26 U. Rich. L. R. 391 (1992). The burden rests with the Lawyer Temp to
recognize direct conflicts and avoid placement in law firms that the Lawyer Temp knows
to represent clients adverse to current clients of the Lawyer Temp or to former clients in
“substantially related” matters, unless an informed consent is received from the clients.
- What are the obligations of the staffing agency, the Lawyer Temp, and/or the law
firm to preserve the confidences and secrets of the clients in accordance with DR:4101?
The appropriate and controlling Disciplinary Rule is DR:4-101, which requires a
lawyer to preserve the confidences and secrets of a client except as disclosure is expressly
authorized under the Rule. The Committee has previously opined regarding the ethical
duties of a law firm and a lawyer serving as “of counsel” to the firm, and an associate of
two firms or one firm with a separate practice, to avoid conflicts and protect client
confidences and secrets. Virginia Legal Ethics Opinions 1293, LE Op. 1293 and 1659,
LE Op. 1659. The lawyer serving as “of counsel” and the associate must adhere to the
requirements of DR:4-101 for safeguarding confidences and secrets of the clients of each
law firm.
It is the responsibility of the Lawyer Temp, therefore, to comply with the requirements
of DR:4-101 by observing strict confidentiality regarding any confidences or secrets
gained in the course of temporary employment. As stated above, if a Lawyer Temp works
in a firm's office on matters for many of the firm's clients and generally has access to
information concerning other clients on whose matters the Lawyer Temp is not working,
the Lawyer temp will be deemed “associated” with the firm as defined in Model Rule
1.10 or regarded as an “associate” for purposes of imputed disqualification under DR:5105(E).
The staffing agency must be mindful that it is not permitted to cause the Lawyer Temp
to breach his/her duty to preserve client confidences and secrets. Consistent with DR:4101 the Lawyer Temp may not discuss or otherwise reveal to the staffing agency or third
parties any client confidences or secrets. In the absence of client consent, the subject
matter and content of the services being provided to clients of the hiring firm should not
be revealed to the staffing agency, and care should be taken not to reveal such
information in any time records provided the staffing agency. City of New York Bar Op.
1988-3(1988).
It is the ethical responsibility of any lawyer using Lawyer Temps to “exercise
reasonable care to prevent his employees, associates, and others whose services are
utilized by him from disclosing or using confidences or secrets of a client, except that a
lawyer may reveal the information allowed by DR:4-101(C) through an employee.”
DR:4-101(E).
Committee Opinion
July 22, 1998
- Is the payment of the fee to the staffing agency (the hourly rate for the Lawyer
Temp) deemed “dividing legal fees with a non-lawyer” in violation of DR:3-102(A)?
The appropriate and controlling Disciplinary Rule is DR:3-102(A), providing that a
lawyer may not pay a portion of legal fees to a non-lawyer. Financial arrangements used
by staffing or placement agencies differ. In the facts you present, the agency places the
Lawyer Temps on its payroll and pays him/her an hourly rate (deducting all appropriate
withholdings) while the Lawyer Temp works on the temporary assignments. The staffing
agency then bills the law firm/law department at that rate, plus a mark-up for the staffing
agency's overhead and profit.
On the facts presented, the Lawyer Temp clearly is not sharing or splitting legal fees
with a non-lawyer, but instead receives full compensation for his/her services from the
non-lawyer staffing agency. It is ethically permissible for a lawyer to be compensated by
a non-lawyer who is not the lawyer's client, provided that such an arrangement does not
interfere with the lawyer's ability to exercise independent professional judgment on
behalf of the client. DR:5-106. Although the staffing agency bills the law firm to recoup
the compensation paid to the Lawyer Temp, the staffing agency is not billing to collect
“legal fees” as that term is commonly understood. A “legal fee” is a sum of money paid
by a client to a lawyer, or to a law firm, for legal services provided by a lawyer or law
firm to that client. The staffing agency is billing the law firm and seeking compensation
for locating, recruiting, screening and providing the Lawyer Temp to the law firm. The
agency is not “practicing law” and its customer, the law firm, is not a “client.” The law
firm, in turn, bills its client and is paid a “legal fee” for services rendered by the law firm
to the client. The legal fee charged by the law firm to the client may include charges for
the Lawyer Temp, and, as discussed in depth, infra, such charges may include overhead
and profit if certain conditions are present. The client pays the legal fee to the law firm,
not to the staffing agency or the Lawyer Temp.
A different procedure was suggested in Formal Opinion Number 1989-2 of the
Association of the Bar of the City of New York. The opinion concluded that the
temporary agency did provide a service, and that the compensation paid by the law firm
was not a legal fee within the meaning of DR:3-102(A). The Committee suggested,
however, that the law firm pay the Lawyer Temp directly for the work performed and pay
the temporary agency a separate fee. Moreover, the agreement and invoices generated by
the agency, it was said, should state separately the fee charged by the agency and should
identify that fee as compensation for the agency's services in locating, recruiting,
screening and placing the Lawyer Temp. In addition, the Committee stated that the
agency's fee, however calculated, may not be included in the legal fee charged by the law
firm to its client. If the firm wished to pass through the agency's fee to its client, as
opposed to absorbing the fee in firm overhead, then the agency fee should be separately
billed to the client as a “disbursement” (cost advance) like any other disbursements for
non-legal services. - Does the law firm have an ethical duty to disclose to its client(s) that it has
engaged the services of a Lawyer Temp?
Committee Opinion
July 22, 1998
The appropriate and controlling Disciplinary Rules are DR:1-102(A)(4), prohibiting a
lawyer from engaging in conduct that involves dishonesty, fraud, deceit or
misrepresentation, and DR:6-101(C), requiring a lawyer to keep the client reasonably
informed about matters in which the lawyer's services are being rendered. EC:2-24 is also
pertinent: “Without the informed consent of his client, a lawyer should not associate in a
particular matter another lawyer outside his firm.”
In the facts presented, the staffing agency's contract with the hiring law firms requires
that a lawyer associated with the law firm shall supervise the Lawyer Temp. To the extent
that the Lawyer Temp reports to and is supervised by a lawyer associated with the firm
(whether partner or associate), the Lawyer Temp is not a lawyer outside the law firm. The
Lawyer Temp's work for a client is the work of the law firm for the client.
In the context of the law firm-provided supervision of the Lawyer Temp's work, the
situation parallels, and has the same effect as, the law firm's assignment of lawyer
resources to perform work for its clients. In practice, a client consults with a lawyer in the
law firm about the legal services needed. The lawyer, in turn, makes an informed
decision about the lawyer(s) in the law firm who are competent and available to do the
work. The work may be assigned to any one or more of partners, senior associates or
junior associates. Absent special circumstances, the law firm does not make and is not
required to make a disclosure of all of its lawyers to whom some or all of the work will
be assigned within the law firm, except possibly after-the-fact to the extent that the
billing statements reflect the names or initials of lawyers who performed work on the
matter. The client hires the law firm and not simply the lawyer consulted about the
matter.
ABA Formal Opinion 88-356 addressed the necessity of disclosure to the client of the
utilization of a Lawyer Temp. It concluded that, if the Lawyer Temp will work
independently, without close supervision of a lawyer associated with the law firm, then
the client must be informed of the Lawyer Temp's participation in the representation and
the client's consent obtained. On the other hand, the ABA concluded, if the Lawyer Temp
will work under the direct supervision of a lawyer associated with the law firm, the law
firm ordinarily will not have to disclose to the client the fact of the Lawyer Temp's work
on the client's matter. The ABA's conclusions were followed in New Jersey Opinion 632
(1989).
The committee concurs with ABA Formal Opinion 88-356. Oliver v. Board of
Governors, 779 S.W.2d 212 (Ky. 1989), reached a different conclusion but on
distinguishable facts. In that case the law firm occasionally hired unaffiliated solo
practitioners on an hourly basis to cover court calls and other routine appearances. The
delegation of work outside the law firm was held to require disclosure to and consent
from the client. The law firm's direct supervision of the unaffiliated solo practitioners in
the performance of their work was not apparent.
Committee Opinion
July 22, 1998
The committee cautions, however, that a law firm's disclosure to and consent from a
client will be necessary whenever the client specifies the lawyer who is to handle the
matter. In that circumstance the lawyer specified would violate the client's instruction,
and mislead the client, if another lawyer, whether or not a Lawyer Temp, handled the
matter without the client's consent. With that exception, however, the law firm's direct
supervision of, and consequent responsibility for, the work of Lawyer Temps fairly
comports with the client's expectation of the quality of services sought in the engagement
of the law firm and its resources without the client's consent to the utilization of the
Lawyer Temp. There is, of course, also an exception that is driven by common sense. If a
Lawyer Temp is assigned to work on a litigation matter entailing an appearance at
depositions or at trial, no law firm would want its client to attend without having received
a disclosure of the Lawyer Temp and his/her role, just as the law firm would do in the
case of an associate or a partner whom the client did not know.
- Must the law firm disclose to the client the payment arrangement with the staffing
agency? May the law firm charge the client a fee that exceeds the amount paid to the
staffing agency?
The appropriate and controlling Disciplinary Rules are DR:1-102(A)(4) which prohibits
a lawyer from engaging in conduct involving dishonesty, fraud, deceit, or
misrepresentation that reflects adversely on the lawyer's fitness to practice law; DR:2105(A) which provides that a lawyer's fee shall be reasonable and adequately explained
to the client; and DR:9-102(B)(3) which requires a lawyer to render an appropriate
accounting to the client.
Whether a law firm retaining a Lawyer Temp must disclose its payment arrangement
with the staffing agency to the client depends on the particular facts. ABA Opinion 88356 stated, and California Formal Opinion 1994-138 agreed, that when the hiring firm
does not charge the Lawyer Temp's compensation to the client as a disbursement, there is
no obligation to disclose the compensation arrangement with the Lawyer Temp to the
client. On the other hand, if the payment made to the staffing agency is billed to the client
as a disbursement, or a cost advanced on the client's behalf (for example, “ToReimbursement of costs advanced to staffing agency for temporary lawyer”), then the
hiring firm must disclose the actual amount of the disbursement and also disclose any
mark-up of or surcharge on the amount actually disbursed to the staffing agency. Any
mark-up of or surcharge on the disbursement billed to the client is tested by the principles
articulated in ABA Formal Opinion 93-379 (1993), as follows:
When that term [“disbursements”] is used, clients justifiably should expect that the
lawyer will be passing on to the client those actual payments of funds made by the
lawyer on the client's behalf. Thus, if a lawyer hires a court stenographer to transcribe
a deposition, the client can reasonably expect to be billed as a disbursement the
amount the lawyer pays to the court reporting service. Similarly, if the lawyer flies to
Los Angeles for the client, the client can reasonably expect to be billed as a
disbursement the amount of the airfare, taxicabs, meals and hotel room.
Committee Opinion
July 22, 1998
It is the view of the Committee that, in the absence of disclosure to the contrary, it
would be improper if the lawyer assessed the surcharge on these disbursements over
and above the amount actually incurred unless the lawyer herself incurred additional
expenses beyond the actual cost of the disbursement item. In the same regard, if a
lawyer receives a discounted rate from a third-party provider, it would be improper if
she did not pass along the benefit of the discount other client rather than charge the
client the full rate and reserve the profit to herself. Clients quite properly could view
these practices as an attempt to create profit centers when the client had been told he
would be billed for disbursements.
DR:2-105(A) and (B) obligate the hiring firm to give the client an adequate explanation
of the legal fees, and at the client's request, to furnish the basis of the legal fees. A law
firm's mark-up of or surcharge on actual cost paid the staffing agency is a fee. In LEO
1648, LE Op. 1648 (1995), the committee opined that it would be improper and
dishonest for a law firm to charge, without disclosure to the client, additional
“administrative fees,” “processing fees” or “value billing” allocated to the originating
attorney (a fixed percentage “add-on” from 20% to 200%) when the originating attorney
did not actually work on the matter. The committee further stated that “any lawyer's bill
which charges fees or costs for work not actually performed is fraudulent, unreasonable,
not adequately explained to the client and breaches the lawyer's duty to properly account
to the client.”
Instead of billing the staffing agency's compensation as a disbursement to the client
with a disclosed mark-up, the hiring law firm may simply bill the client for services
rendered in an amount reflecting its charge for the Lawyer Temp's time and services. See
California Formal Opinion 1994-138. Since the charge is not represented to be the hiring
law firm's actual disbursement of funds for client-reimbursement, the hiring firm does not
thereby misrepresent as an out-of-pocket disbursement what is actually its out-of-pocket
disbursement plus a mark-up. By analogy, law firms bill their clients at a certain rate for
services rendered by salaried associates of the law firm without a disclosure of the salary
of the associates. A law firm may, for example, charge $75 per hour for an associate's
time when the associate is paid a salary of $60,000 per year and is expected to produce
1,800 billable hours per year, which is compensation paid the associate at the rate of $33
per hour. That the associate is an employee and the Lawyer Temp is an independent
contractor seem to be a distinction without a difference in terms of non-disclosure of the
spread between compensation paid and rates charged. In each instance the spread, or the
mark-up, is a function of the cost of doing business including fixed and variable overhead
expenses, as well as a component for profit. In each instance, too, DR:2-105(A)(1)
mandates that a lawyer's fees shall be reasonable.
- What are the obligations of the staffing agency, the Lawyer Temp, and/or the
hiring law firm to ensure that the Lawyer Temp exercises independent professional
judgment on behalf of a client?
The same concerns expressed in the context of in-house liability claims against an
insured, and the provision of legal services under prepaid legal service plans, apply with
Committee Opinion
July 22, 1998
equal force to Lawyer Temp placement services, i.e., these are arrangements in which
non-lawyer intermediaries exercise control over the delivery of legal services and
therefore may engender interference with the lawyer's obligations to (1) exercise
independent professional judgment on behalf of a client; (2) maintain client confidences
and secrets; (3) avoid conflict of interests; and (4) practice law competently. See, e.g.,
UPL Opinion No. 60 (1985) (liability insurer may use in-house staff counsel to defend
claims brought against insureds). The staffing agency must recognize that the relationship
between the Lawyer Temp and the client is not different from the traditional attorneyclient relationship. The agency must not attempt to limit or in any way control the amount
of time a lawyer may spend on a particular matter, nor attempt to control the types of
legal matters which the Lawyer Temp may handle. The Lawyer Temp may not enter into
an employment agreement with the agency that restricts his or her ability to exercise
independent professional judgment on behalf of a client or restricts his or her right to
practice law. DR:5-106(A); DR:2-106(A).
These concerns are addressed in EC:5-23:
A person or organization that pays or furnishes lawyers to represent others possesses
a potential power to exert strong pressures against the independent judgment of those
lawyers. . . Since a lawyer must always be free to exercise his professional judgment
without regard to the interests or motives of a third person, the lawyer who is
employed by one to represent another must constantly guard against erosion of his
professional freedom.
Competence is a component of independent professional judgment. It is not ethically
permissible for a Lawyer Temp to accept a temporary assignment that requires him/her to
undertake representation in a matter in which he/she lacks the competence and specific
legal knowledge employed in acceptable practice by lawyers undertaking similar matters.
DR:6-101(A). Although the burden of DR:6-101(A) rests on the Lawyer Temp, the
staffing agency should ascertain his/her practice areas of competence and not direct
assignments for temporary legal services outside those practice areas. Were the staffing
agency to do so, the directed assignments would not exonerate the Lawyer Temp under
DR:6-101(A) since a lawyer is not permitted to circumvent a Disciplinary Rule through
actions of another. DR:1-102(A)(2).
CONCLUSION
It is ethically permissible for a law firm or a corporate law department to retain the
temporary services of a lawyer through a lay placement/staffing agency. Hiring a lawyer
for temporary services is treated like hiring a lawyer from another law firm. Hence, the
hiring law firm and the lawyer retained for temporary services have an ethical obligation
to ascertain whether conflicts of interest exist with respect to current and former clients of
each of the law firms and the lawyer.
In the absence of informed client from the clients affected, a law firm or corporate law
department is not ethically permitted to retain a placement/staffing agency-provided
Committee Opinion
July 22, 1998
lawyer who (i) currently represents a client in a matter adverse to a client of the law firm,
or (ii) formerly participated in the representation of a client adverse to a client of the law
firm in the same or a substantially related matter. Whether a lawyer retained for
temporary services will be deemed “associated with the firm,” and thus trigger imputed
disqualification of the law firm under DR:5-105(E), is a fact-intensive issue. If the lawyer
had broad access to client files and client communications in his/her temporary
assignments, even though he/she was not involved in the representation of the client,
there may be a presumption that client confidences and secrets were gained.
On the facts presented, the financial arrangement among the hiring law firm, the
staffing agency, and the Lawyer Temp does not constitute a sharing of legal fees with a
non-lawyer under DR:3-102 or a division of legal fees between lawyers not in the same
firm under DR:2-105(D).
The law firm is not required to disclose to and get consent from the client to whose
representation the Legal Temp is assigned that a Lawyer Temp will participate in the
representation as long as the Legal Temp reports to and is under the direct supervision of
a lawyer associated with the law firm.
If the law firm's payment to the staffing agency is billed to the client as a disbursement,
or as a cost advanced by the law firm on behalf of the client, the disbursement shown
must be the amount actually paid to the staffing agency. Upon disclosure to and consent
from the client, the disbursement shown may be marked-up above the actual payment to
the staffing agency. The law firm is not obligated, however, to bill the payment to the
client as a disbursement. The law firm, in its statement for services rendered, may bill for
the services of a Lawyer Temp at a rate or in the manner that it bills the time of salaried
associates for services rendered, without disclosure of the amount paid the staffing
agency.
The staffing agency is not permitted to interfere with or influence a Lawyer Temp's
exercise of independent professional judgment on behalf of the clients for whom he/she
provides services. The staffing agency should ascertain Lawyer Temp's practice areas of
competence, and the Lawyer Temp should decline assignments for temporary services in
matters outside his/her competence.
Committee Opinion
July 22, 1998
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