Small Law Firms

Law Firms Shouldn't Ask Associates To Front Business Expenses

It is easy enough for law firms to issue firm credit cards or pay for such expenses directly.

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It is common for law firms to ask employees to front business expenses with the promise that these costs will be reimbursed at a future date. For instance, many law firms ask that attorneys pay for travel expenses, meals on business trips, and other costs, and associates submit expense reimbursement requests so that they can get paid back for these costs at a later time. However, law firms should not force associates to front substantial expenses for a law firm and should pay for such costs directly or issue business credit cards so that associates do not need to shell out money themselves if they do not wish to do so.

I first became aware of the concept of expense reimbursements during my first month as an associate in Biglaw. A bunch of new associates and I needed to travel to a different city in order to attend an orientation for new associates, and the firm asked that we all book our own travel and pay for all of the expenses associated with the retreat ourselves. The firm promised that we would be reimbursed at a later time.

At that point, I was extremely broke, and I had high-interest student loans. I felt somewhat uncomfortable paying thousands of dollars for travel expenses with my personal credit card with the promise that I would be reimbursed for these costs at a later time. I had not even worked at the firm for a month at that time, so I didn’t even know how the firm’s systems around expense reimbursements worked. However, since I was new to the law firm, I did not want to rock the boat by requesting that the firm pay for these expenses directly, so I charged the expenses to my personal credit card and hoped for the best.

When I returned home from the orientation, I immediately got my receipts together to be reimbursed for the trip. However, since I was new to the firm, it took a while for my information to be populated into our firm’s expense reimbursement system. It eventually took several weeks for me to get reimbursed for these expenses, and carrying the cost of these expenses on my credit card and paying the balance myself while waiting to be reimbursed meant that I was unable to devote money to my student loans. Since my student loans at the time had an interest of up to eight percent, I likely lost money carrying the expenses of the firm personally until I could be reimbursed.

Firms should not presuppose that associates have the financial security needed to front firm expenses and await reimbursement. Indeed, many associates have substantial student debt, and any money that they need to use to cover firm expenses cannot be immediately devoted to student loans or other financial goals. Of course, some law firms have very efficient expense reimbursement systems, but this may not ensure that employees will get reimbursed before a student loan or other payment needs to be submitted.

Later in my career, I worked on mass torts matters, and I was required to travel extensively. At my peak, I was spending 70 nights a year in hotels, and I had to expense my travel, hotels, meals, and other expenses associated with traveling for these mass torts matters. I discovered that I could actually earn a substantial amount of credit card points by charging all of the expenses to my personal credit card and getting reimbursed by my firm as was the firm policy. However, I would routinely have a high four-figure balance on my credit card stemming from travel related to my mass torts work.

When the firm processed expense reimbursements in a timely fashion, there was no issue, since I did not need to use my own personal funds to pay off my credit card that included the work expenses. However, sometimes the firm would process expense reimbursements at a slow pace. At times, staff would seemingly go on vacation and this impacted the response time for the expense reimbursements. At other times, it seemed like there was just a high volume of expense reimbursement requests to be processed, and this added to the time it would typically take for me to be reimbursed for business expenses.

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More than once, the expense reimbursements would not arrive by the time payment needed to be made on my credit cards, so I had to use my own personal funds to “float” the firm and pay off the charges so I would not be charged interest. This meant that I had less money to pay off my student loans or work toward other financial goals I was pursuing. As a result, even if there are advantages to charging business expenses to personal credit cards, there can be drawbacks, and firms have an obligation to process expense reimbursements as quickly as possible so they do not financially burden their associates.

All told, law firms should never assume that associates are financially able to front business expenses, and firms should never force associates to pay for business expenses to be reimbursed at a later time. It is easy enough for law firms to issue firm credit cards or pay for such expenses directly to ensure associates do not need to dip into their own money to float costs for the firm. In addition, firms need to be efficient in processing expense reimbursements so associates can avoid applying their own money to pay off business charges.

Jordan Rothman is a partner of The Rothman Law Firm, a full-service New York and New Jersey law firm. He is also the founder of Student Debt Diaries, a website discussing how he paid off his student loans. You can reach Jordan through email at jordan@rothmanlawyer.com.

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