Ethics Matters

Mark Dubois: The ABCs Of Independent Contractors

The Connecticut Law Tribune

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Mark Dubois
Mark Dubois

Part one of two parts.

The subject of independent contractors exists as the intersection of labor law and ethics rules. Before I again venture into discussion of a labor law topic, please understand that I am not providing legal advice here. Any similarity between what I may tell you and the truth may be coincidental. If you have a labor problem, consult a labor lawyer.

That being said, I have had occasion to study the law of independent contractors on two occasions in the recent past. The first instance involved some attorneys who wished to practice together. One had a firm, and wished to bring his colleagues in for some special matters, and to refer out other cases to several of his colleagues who would work collaboratively on them. They were afraid of acting as or being understood to be a firm for a variety of reasons, including imputed conflict issues. The other case was the opposite, where a lawyer sought to treat some of his employees as independent contractors and ran afoul of the state Department of Labor. Both cases involved the intersection of ethics rules and labor law.

Things used to be much simpler when lawyers were either solos, and either "of counsel to," or full members of a firm. Now, with entities such as Axiom reshaping the market, it is common for lawyers from different practices to join forces for a particular piece of business, work together, and then disband. It may be a transactional matter, where different firms or lawyers do different parts of the work on a "project" basis. The same paradigm works with litigation, and this model has been adopted by many in the mass torts field. All of this works quite well from a business point of view, but the ethics laws were written in simpler times, and fitting new models into old rules involves lots or square pegs and round holes.

Rule 7.5(d) prohibits lawyers from pretending to be members of a firm or other organization unless that is really the case. So the first hurdle is how you describe the relationship. Thus, I have seen some interesting letterheads describing the entity variously as "not a partnership," "a partnership of LLCs," and "an international legal practice providing client services worldwide through its member firms and affiliates." Axiom just describes itself as a "firm," and as "more than a few (hundred) pretty faces." As long as the name is not false and misleading, it is probably OK. Maybe you don't use a name for the entity.

If there is no firm (think co-counsel vs. of-counsel—more on that below), each lawyer needs to either send a fee letter to or enter into a retainer agreement with, the client. I have seen cases where a single fee letter or retainer comes from all the lawyers. Each signs on behalf of her or his self or firm. But what if we are dealing with a new entity created for the matter, or if a firm has brought in one or more subcontractors for a project; how do they deal with describing the relationship?

It used to be that when a lawyer wanted to associate himself with a firm without becoming a partner, shareholder or associate, she might become "of counsel." This is a term of art, and there are robust resources devoted to discussing it, including an American Bar Association opinion and an excellent book on the subject from the ABA. Bottom line is that "of counsel" denotes a "close, regular and personal" relationship between the lawyer and the firm. So close that for conflicts purposes, the lawyer and the firm are treated as one.

Uh oh! Remember, the rule of imputed conflicts says that any member of a firm may "infect" all members of a firm with a conflict. Checking conflicts when groups of lawyers are working together can take a lot of time. And as the remedy for a conflict includes the disgorgement of fees, they are best avoided.

In an attempt to avoid this, some of us have adopted an "independent contractor" or "co-counsel" approach. This is where the labor laws kick in. The independent contractor regime has been misused by some less than scrupulous employers to avoid paying taxes for or on, making contributions on behalf of and providing benefits to their employees and as an end-run on the wage and hour laws. This has been met with predictable resistance by government agencies and officials whose job it is to enforce these laws. Dealing with these folks is not fun, and there are penalties associated with getting it wrong.

Part deux, next week.

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