Surge Instead of Splurge
Cost-Conscious Firms Rely on Contract Lawyers When Legal Demand Peaks
Posted Sep 29, 2005 12:19 AM CST
By Terry Carter
Mergers and acquisitions in the telecom industry during the past couple of years triggered a lot of regulatory review in Washington, D.C. And that meant law firms working the deals had to throw bodies into document review.
“Everybody was looking for contract lawyers to staff the mergers, and word on the street was that Crowell & Moring had scooped them all up,” says Montgomery Kosma, an antitrust lawyer in Jones Day’s D.C. office. “They’d been running ads, even hiring people in Los Angeles.”
Welcome to the end of splurge and the reality of surge. Today, law firms are less willing to carry boatloads of associates on the payroll while waiting for the next big deal or case. And that is partly because corporate law departments are tightening their own spending.
“We like the flexibility of being able to build up quickly and then reduce your work force quickly and be more responsive to supply-and-demand cycles,” says John McLeod, Crowell & Moring’s managing partner.
Some firms hire contract lawyers directly, while others hire temp lawyers from agencies. Many mix the two.
The legal niche in the temporary staffing industry has been growing by double digits annually since 2001, in part because of belt-tightening in the economic slowdown and in part because of growing acceptance of them.
In 2001-02, the growth rate for temporary legal staffing was about 4.5 percent, according to a survey by Staffing Industry Analysts Inc. Since then, the rate has ranged from 11 percent to 15 percent, including nonlawyer legal staffing. The survey predicts legal staffing will grow from $800 million during those years to $1.4 billion in 2006.
“It’s been one of the fastest-growing segments in the industry in recent years,” says Barry A. Asin, executive vice president of Staffing Industry Analysts Inc. “There has been an ongoing long-term trend of acceptance among professional positions, and certainly law firms are no longer immune to economic forces, making everyone more competitive and flexible.”
Acceptance came first in corporate law departments, which have encouraged outside law firms to rely more on contract or temp lawyers. In a 2003 survey of general counsel by legal consultant firm Altman Weil Inc., companies reported spending an average of $14,999 per contract lawyer the previous year. In 2004, that jumped to $26,243.
“At first everyone was skeptical about the quality of contract lawyers,” says Daniel J. DiLucchio Jr., a principal with Altman Weil. “Then they found they were getting high-quality people who just didn’t want full-time work or life in a law firm.”
Getting the Job Done
Acceptance came early for law firms doing work for E.I. du Pont de Nemours & Co. DuPont began winnowing out several hundred of its law firms in the early 1990s, and now just 42 firms remain.
“We look at litigation strategy and resources needed to get the job done, and bring the whole discussion about temp lawyers way up front before a firm throws a large number of associates at a problem,” says Thomas L. Sager, DuPont’s assistant general counsel. Some law firms or in house shops hire contract lawyers directly, often paying hourly rates. Since the late 1990s, the number of temporary legal staffing companies has exploded, and more and more firms fill surge capacity with their help. Many of those companies now offer insurance, vacation and other benefits to the temp lawyers. At the low end, contract lawyers make $25 to $30 an hour, with document review usually bringing $30 to $40, says Robert J. Murphy Jr., president of Assigned Counsel Inc., which has offices in several regions. Some specialized temp lawyers get $100 an hour or more.
One word explains much of the increasing need for bodies in litigation: e-mail. Every nanobyte must be reviewed to determine what is responsive, privileged or irrelevant. It’s the kind of job that contract lawyers often do.
“I think they expect the work to tend to be repetitive and perhaps less interesting over time,” says McLeod of Crowell & Moring. And it’s not “what a firm’s associates prefer—write briefs, do motions and depositions.”
Some believe contract lawyers often turn out to be better at their tasks than law firm associates.
“These temps know they’re on a focused project and their efficiency and quality control is tremendous compared to a firm’s associates working on five different matters,” says Terrence T. Murphy, vice president of Kelly Law Registry, the legal staffing arm of Kelly Services Inc. “They’re laser-specific and the quality goes up.” Contract lawyers do the job for a variety of reasons. Some want flexible schedules, fewer hours. Many simply need work, especially when law firm hiring is down. And some say that leads to exploitation.
“We’ve always encouraged lawyers, no matter how desperate you are, not to take a job that pays less than a temp secretary—you have a law degree,” says Deborah Guyol, a contract lawyer in Portland, Ore., and co author of The Complete Guide to Contract Lawyering: What Every Lawyer and Law Firm Should Know about Temporary Legal Services (available at www.ababooks.org).
At the same time, “The work offers a lot of opportunities,” Guyol says. In some cases, contract lawyers eventually became staff lawyers.
Finding an Open Door
That happened at Philadelphia’s Morgan Lewis & Bockius. The firm has used as many as 100 contract lawyers at a time, a mix of those provided by agencies and some hired directly by the firm. When litigation picked up earlier this year, the firm decided to hire a number of them as non-partner-track staff lawyers.
“We’ve tried to hire as many as we can justify so they’re our people,” says Thomas J. Sharbaugh, managing partner for operations. “But we still deal with surge issues by using temps.”
Work arrangements vary for the new staff lawyers. Some work certain hours, others certain days. Some are more part time than others, and the more part-time, the more likely they are paid an hourly rate, Sharbaugh says. He declines to say how many staff lawyers the firm hired.
Inevitably, some contract lawyers are going to stand out. Thus, some of them—though not many—have “come over the bridge” to partner track positions at the firm, according to Sharbaugh.
At Crowell & Moring, “From time to time, one or another of them sufficiently shows his or her stuff that we elect to make them regular associates and they progress up the ranks,” says McLeod. “Just last year we promoted someone to partner who had joined us years ago as a contract lawyer.”