More Risks To Consider When Using Contract Attorneys

Our previous article, "What to do When Hiring a Contract Attorney" (Daily Report, June 15, 2015), discussed some of the rewards and risks of using contract attorneys.

Based on the response from readers, one thing is clear: The use of contract attorneys is on the rise, with law firms eager to learn more about the steps they can take to safely and securely use contract attorneys.

The previous article identified four risks associated with hiring contract attorneys: the duty to supervise, exclusive vs. non-exclusive contract attorneys, contract attorneys and overtime, and documenting relationships. Those risks materialize in various ways, ranging from ethical challenges and undetected conflicts of interest to wage and overtime claims.

Wage and overtime claims are increasingly of interest to law firms. Some firms are finding themselves on the receiving end of wage and overtime claims by contract attorneys, and other law firms, such as Sidley Austin, have been hired to defend overtime cases.

In addition to the risks already identified, there are myriad other issues arising out of law firms' use of contract attorneys. This article discusses other risks that law firms should consider when using contract attorneys.

Make no mistake: there is nothing inherently wrong, unethical or unprofessional about using contract attorneys. But the risks involved are unique and merit a different kind of attention. Here are more suggestions for addressing them.

Insurance Coverage

While some legal malpractice insurers specifically ask about the use of contract attorneys, not every insurer does. Some applications do not even distinguish between partners and associates, much less mention contract attorneys. Within this ambiguity lies the greatest risk for law firms using contract attorneys.

Unfortunately, many law firms do not focus on the issue until a legal malpractice claim arises involving services performed by a contract attorney. Contract attorneys themselves may fail to confirm whether any claim made against them is covered under the law firm's legal malpractice policy.

Many policies require that, for coverage to exist, the services performed must arise out of an attorney-client relationship. For those law firms who retain contract attorneys as independent contractors (subject to IRS standards), this can be especially complicated. The law firm may find itself arguing on one hand that an independent contractor attorney does not actually represent the law firm's...