Can a lawyer be a salaried employee of a nonprofit that bills its members for the lawyer's legal services?

Plain-English summary

The inquiring lawyer was an employee of a nonprofit corporation that rendered labor-management services to member companies and, in addition to legal services provided through the lawyer, offered other professional services to its members. The lawyer was paid a salary that, as he explained, "does not exceed the direct and indirect cost of my position." The corporation intended to adopt a membership agreement featuring a nominal uniform membership fee and charges billed hourly for all professional services, including attorney services.

The committee was of the opinion that the proposed arrangement violates RPC 5.4. It did not view the lawyer's role as house counsel advising the corporation; instead, the lawyer was providing legal services to members of the general public who pay dues and are called "members."

The committee treated the for-profit or not-for-profit status of the corporation as immaterial. Member companies pay legal fees to the corporation, which then passes them to the lawyer as salary; the committee was of the opinion that the lawyer was in every real sense sharing the fee with the corporation, whether or not all direct and indirect costs were covered. The committee was also of the opinion that the arrangement constituted the formation of a business relationship with nonlawyers to practice law.

Currency note

This opinion was issued in 1988, before the 2006 revisions to the Washington Rules of Professional Conduct. The rule then numbered RPC 5.4 corresponds to Model Rule 5.4 and was carried forward, with revised wording, in the current rules. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule mentioned here.

Common questions

Q: Is it fee-sharing if the lawyer only draws a salary that covers his costs?

A: Per the opinion, yes. The committee was of the opinion that the lawyer was in every real sense sharing the fee with the corporation whether or not all direct and indirect costs were covered.

Q: Does it matter that the employer is a nonprofit?

A: No. The committee was of the opinion that whether the corporation is for profit or not for profit was immaterial.

Q: Why wasn't this treated as an ordinary in-house counsel job?

A: The committee did not view the lawyer's role as house counsel advising the corporation, but as providing legal services to members of the general public who pay dues and are called "members."

Background and rules framework

The opinion applies the rule then numbered Washington RPC 5.4 (subsection (a) noted in the inquiry), corresponding to Model Rule 5.4, which prohibits a lawyer from sharing legal fees with a nonlawyer and from forming a business relationship with nonlawyers to practice law. The committee looked through the salary mechanism to the substance: member fees flowed to the corporation and then to the lawyer, so the corporation was sharing in legal fees, and the structure amounted to practicing law in a business relationship with nonlawyers.

Citations and references

Rules of Professional Conduct:

• Washington RPC 5.4(a) (a lawyer shall not share legal fees with a nonlawyer), corresponding to Model Rule 5.4(a).

See also

• WSBA Ethics Op. 1132: a lawyer-intermediary cannot operate through a nonlawyer mediation team that shares fees
• WSBA Ethics Op. 1119: a lawyer-nonlawyer partnership to run a child-custody evaluation business
• ABA Formal Op. 464: dividing a fee with a firm that shares fees with nonlawyers

Source

• Landing page: https://ao.wsba.org/print.aspx?ID=223

Original opinion text

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

Advisory Opinion: 1143
Year Issued: 1988
RPC(s): RPC 5.4(a)
Subject: Division of fee with nonlawyer; lawyer as employee of non-profit that charges members for legal services

The Committee reviewed your inquiry concerning your conduct as an employee of a non-profit corporation which renders labor management services to member companies. In addition to providing legal services through you, the non-profit corporation apparently provides other professional services to its members. The Committee understood that you are paid a salary from the non-profit corporation which, as explained by you, "does not exceed the direct and indirect cost of my position." They further understood that the corporation intends to adopt a membership agreement "featuring a nominal uniform membership fee and charges billed at an hourly basis, for all professional services, including attorney services." The Committee was of the opinion that the proposed arrangements violate RPC 5.4. The Committee did not view your role as a house counsel providing advice to the corporation, but rather providing legal services to the general public who pay them dues (fees) and are called "members." The Committee was of the opinion that whether the corporation is for profit or not for profit was immaterial. Member companies pay legal fees to the corporation who then passes them on to the lawyer as salary. The Committee was of the opinion that the lawyer was in every real sense sharing the fee with the corporation whether all direct and indirect costs were covered or not. The Committee was also of the opinion that this arrangement constituted the formation of a business relationship with non-lawyers to practice law.