An important piece from the WSJ on the evolution of the legal profession and how new attorneys are largely out of luck.

Call it the “first-year dilemma.” By the time many young lawyers start work at law firms, they have done quite a lot. Their backgrounds typically include three years of law studies, work as summer interns, and time devoted to studying for and taking the bar exam. Many have even spent a year or two helping a judge research and draft legal opinions.

But lawyers said there is still a gulf between a newly minted lawyer and one who can provide value to a client. Among the skills often absent are a comfort and confidence with clients, a sophisticated knowledge of the business world, and many nuts and bolts, such as how to prepare a witness for a deposition or the precise terms that, say, need to be included in a particular kind of loan agreement.

Law firms often treat the first two years of an attorney’s career as a sort of apprenticeship, albeit a well-paid one: the yearly salaries at many of the nation’s largest law firms start at $160,000.

Traditionally, law firms have recouped costs of young attorneys by giving them simple jobs—research, proofreading or culling important documents from boxes of paperwork—and passing the costs along to clients in the form of hours billed at $200 or $300 a pop.

But many companies are now refusing to pay those kinds of bills. According to a September survey for The Wall Street Journal by the Association of Corporate Counsel, a bar association for in-house lawyers, more than 20% of the 366 in-house legal departments that responded are refusing to pay for the work of first- or second-year attorneys, in at least some matters. Almost half of the companies, which have annual revenues ranging from $25 million or less to more than $4 billion, said they put those policies in place during the past two years, and the trend appears to be growing.

The tasks that were once reserved for first-year associates can now be farmed out to contract attorneys, overseas, and dare I say it, computers!

John Albright, the chief legal officer for the market-research firm SymphonyIRI Group Inc., said the firm about 18 months ago adopted an informal policy of hiring only experienced attorneys. First-year associates are suited for some tasks, such as reviewing documents, but in most instances, they present “efficiency and value concerns,” he said, adding that his policy stemmed from a combination of “the reality of the constraints on law-department budgets and the higher first-year rates.”

Of course, the more menial tasks still need to get done. But many corporate legal departments are either farming them to their own employees or giving them to so-called contract attorneys, lower-cost outside lawyers who work independently from the large law-firm ecosystem.

“The savings with contract attorneys can be huge,” said David Nation, the general counsel at software maker Bentley Systems Inc., outside Philadelphia. He said that on several large litigation matters in recent years, the company had used contract lawyers instead of young law-firm associates to handle the paper-intensive and costly “discovery” phase of the cases. “Instead of paying $200-$300 an hour, we were paying $60 or $70. And the quality has been uniformly outstanding,” he said.