Biglaw, Contract Attorneys, Legal Ethics

Best (And Not So Best) Practices For Billing Clients For Contract Attorney Work

In some jurisdictions, it's illegal for law firms to treat contract attorneys as a profit center.

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Independent Contractors Contracts Freelance Workers FreelancersIt’s no secret that some Biglaw firms treat contract attorneys as a profit center. They pay the contractors a pittance, they charge the client a fortune, and they pocket the difference.

It’s not a good practice — well, at least not for the clients and the contractors — but it’s common enough that clients are starting to rebel. Some clients will, in their engagement letters, prohibit outside counsel from “upcharging” for contract attorneys. Other clients will require their law firms to use specific vendors or alternative legal services providers for work that would normally be done by contractors.

But did you know that law firms profiting from contract attorneys is actually impermissible in some jurisdictions? As noted in the Texas Lawyer, state bar ethical rules in Texas and Maryland forbid upcharging for contract attorney work.

And at least one litigation powerhouse doesn’t upcharge for contractors across the board, regardless of jurisdiction:

Susman Godfrey has a policy when it comes to contract lawyers: The high-flying litigation firm discloses to clients exactly how much the temporary attorneys cost, and that’s exactly what the client pays.
In other words: No surcharge.

“We do a pure pass through,” said Erica Harris, Susman’s hiring partner and chairwoman of its employment committee….

The Houston-based firm applies the same standard in all its other offices as well — New York, Seattle and Los Angeles.

That’s classy — and it hasn’t prevented the firm from thriving either. Any firm that pays a $25,000 starting bonus — on top of a starting salary of $190,000, clerkship bonuses of $80,000 to $100,000, and generous year-end bonuses — can’t be doing that badly.

Earlier: Associate Bonus Watch: Which Firm Now Offers Up To $125,000 In Associate Starting Bonuses?

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DBL square headshotDavid Lat is the founder and managing editor of Above the Law and the author of Supreme Ambitions: A Novel. He previously worked as a federal prosecutor in Newark, New Jersey; a litigation associate at Wachtell, Lipton, Rosen & Katz; and a law clerk to Judge Diarmuid F. O’Scannlain of the U.S. Court of Appeals for the Ninth Circuit. You can connect with David on Twitter (@DavidLat), LinkedIn, and Facebook, and you can reach him by email at dlat@abovethelaw.com.

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