Two new articles in the WSJ on our changing legal profession.
First, an article about the explosion of use of contract attorneys.
For 10 to 12 hours a day—and sometimes during graveyard shifts—contract attorneys such as Mr. Aponte sit silently in a big room, at rows of computer monitors. Each lawyer reads thousands of documents online and must quickly “code” every one according to its relevance in litigation or an investigation.
Supervisors discourage talking and breaks are limited. The computer systems count each lawyer’s speed. Some law firms use their own contract attorneys, while others hire them through third-party agencies.
The increasing reliance on temporary workers comes as the industry continues to struggle from a downturn that has produced a glut of unemployed U.S. lawyers, including crops of indebted recent law school graduates. About 10% of all private practice jobs accepted by last year’s law school graduates were reported as temporary, a steady increase from 5.4% in 2007, according to the National Association for Law Placement.
Why the need for contract attorneys? Because associates bill too much and clients are not willing to pay this anymore.
Temporary legal staffing in the U.S. is projected to increase by 25% cumulatively over the next two years, according to Staffing Industry Analysts, a temp-industry tracking group. The hourly rates that temp agencies charge for contract attorneys are just a fraction of what a first-year associate at a big law firm typically bills per hour.
Large firms are billing $325 to $550 for an hour’s work this year by freshman associates, while smaller firms bill them as low as $100, according to research firm Valeo Partners. Temp staffing agencies, in contrast, might bill around $50 an hour or less for document review work by contract attorneys.
Skeptics often criticize my forecasts of the legal profession. All of their arguments focus on the need to develop young associates. What they forget (shockingly for practicing attorneys) is that attorneys only earn a fee at the indulgence of the client. If a client is no longer willing to pay high fees to young associates, that work will be shipped out to contract attorneys, overseas, or to information systems. Perhaps that will result in a lost generation of skilled attorneys, and clients will have to deal with that later. But, that is not a reason to fight against these changes.
The article also explores the commoditization of the legal profession, something I have written about as the key to the future of legal markets.
This new “third tier” of the legal world illustrates the commoditization of the legal profession, which once offered most new entrants access to prestige and power, as well as a professional lifestyle. It also shows how post-recession belt-tightening is permanently altering some professions.
The second article explores the legal framework for contract attorneys, and whether federal overtime laws should cover them.
“They should have one single benefit of getting paid like a normal person, which is time-and-a-half overtime,” said Maimon Kirschenbaum, the lawyer for a contract attorney who sued plaintiff firm Labaton Sucharow LLP. Mr. Kirschenbaum said he was speaking generally of contract attorney work and not specifically about Labaton.
Labaton was sued last year in federal court in Manhattan by a temp lawyer alleging the plaintiff firm violated federal labor laws by failing to pay overtime. Labaton had argued the temp lawyer was exempt from overtime obligations of state and federal law. Underlying the plaintiff’s case is the theory that, in document review, the temp wasn’t really acting as a lawyer. The case was settled, but the terms weren’t disclosed.
Interesting. A contract attorney, who went to law school, and is doing “legal” work has to argue that he is not acting as a lawyer.
Professor Larry Ribstein, as usual, has insightful commentary about the evolution of the legal practice.
But it could get worse, because even these jobs may be replaced by machines. . . . If law firms can’t bill contract lawyers at associate rates, they may as well try to keep their costs down by mechanizing. As for malpractice liability, machines don’t get tired or sloppy.
But all is not lost. There are other jobs out there for lawyers, including designing and programming the products and machines that will replace the lawyers of the past.