As the legal industry has evolved and firms have begun to innovate and reduce costs by outsourcing legal work to contract and freelance attorneys, a number of questions have arisen concerning the ethical responsibilities of an outsourcing firm vis-à-vis its clients, as well as its duties to supervise the attorneys to whom it has outsourced work. Three primary issues have emerged: 1) whether a hiring attorney is obligated to disclose that it has outsourced legal work to the client; 2) whether a hiring attorney is permitted to add a surcharge when billing the client for the freelance attorney’s work; and 3) whether a hiring attorney may ethically use the services of a freelance attorney who is not licensed in the hiring attorney’s jurisdiction. The American Bar Association’s Standing Committee on Ethics and Professional Responsibility has helpfully addressed each of these issues, which are discussed in more detail below.
Must I disclose my use of freelance attorneys to my clients?
A cautious approach counsels obtaining a client's informed consent. Comment  to Model Rule of Professional Conduct 1.1 (Competence) was amended in 2012 to state that lawyers should "ordinarily obtain informed consent" before contracting with other lawyers for assistance on a client matter. This stands somewhat at odds with the ABA's earlier Formal Opinions, which did not require disclosure where the hiring attorney closely supervised the freelance attorney's work. Inserting a paragraph into your retainer agreement that addresses the firm's use of non-firm personnel is one simple way to satisfy this requirement.
The ABA Standing Committee on Ethics and Professional Responsibility first addressed this issue in 1988. Recognizing the policy implied by Rule 7.5(d), that clients are entitled to know who is representing them, the Committee explained that “[a] client who retains a firm expects that the legal services will be rendered by lawyers and other personnel closely supervised by the firm,” and opined that, “where the temporary lawyer is working under the direct supervision of a lawyer associated with the firm, the fact that a temporary lawyer will work on the client’s matter will not ordinarily have to be disclosed to the client.” ABA Comm. on Ethics & Prof'l Responsibility, Formal Op. 88-356 (Dec. 16, 1988) (Temporary Lawyers). Implicit in this analysis was the assumption that disclosure of the client’s confidential information to the freelance attorney is “impliedly authorized in order to carry out the representation.” See MODEL RULES OF PROF'L CONDUCT R. 1.6(a).
Twenty years later, the ABA Committee revisited the issue of disclosure, distinguishing the typical relationships that existed between firms and temporary lawyers in 1988, “which involved a high degree of supervision and control,” and the now-common practice of hiring contract attorneys through temporary legal services agencies, which results in a more “attenuated” relationship. ABA Comm. on Ethics & Prof'l Responsibility, Formal Op. 08-451 (Aug. 5, 2008) (Lawyer’s Obligations When Outsourcing Legal and Nonlegal Support Services). Specifically, the Committee opined: “[w]here the relationship between the firm and the individuals performing the services is attenuated . . . no information protected by Rule 1.6 may be revealed without the client’s informed consent. The implied authorization of Rule 1.6(a) and its Comment  to share confidential information within a firm does not extend to outside entities or to individuals over whom the firm lacks effective supervision and control.” Id. (emphasis added).
In order to satisfy the requirement of “close supervision,” an outsourcing lawyer must “ensure that tasks are delegated to individuals who are competent to perform them, and then to oversee the execution of the project adequately and appropriately.” ABA Comm. on Ethics & Prof'l Responsibility, Formal Op. 08-451. Pursuant to Rule 5.1, “a lawyer having direct supervisory authority over another lawyer shall make reasonable efforts to ensure that the other lawyer conforms to the Rules of Professional Conduct.” MODEL RULES OF PROF'L CONDUCT R. 5.1(b). See ABA Comm. on Ethics & Prof'l Responsibility, Formal Op. 08-451 (“Th[is] provision applies regardless of whether the other lawyer . . . is directly affiliated with the supervising lawyer’s firm.”) In other words, the level of supervision necessary over a freelance attorney’s work is the same as that expected over the work of an associate.
In 2012, the ABA more concretely addressed a lawyer's use of freelance or contract lawyers when it amended the comments to Rule 1.1 (Competence). Comment  to Rule 1.1 now states: "Before a lawyer retains or contracts with other lawyers outside the lawyer's own firm to provide or assist in the provision of legal services to a client, the lawyer should ordinarily obtain informed consent from the client." MODEL RULES OF PROF'L CONDUCT, R. 1.1 cmt. 6. It is therefore advisable for a hiring attorney to obtain their client's informed consent before utilizing the services of a freelance attorney on the client's matter.
The following is an example of a paragraph that could be included in your retainer agreement to satisfy the requirement of informed consent:
You are hiring the firm for representation and not any particular individual. The firm may assemble the team of professionals best suited to serve your needs at each stage of your matter. The firm may share with these professionals information about your matter as necessary for them to carry out their responsibilities. All non-firm personnel are subject to the firm's on-going supervision and applicable ethics regulations. You expressly consent to the firm's use of these professionals and to disclosure of information as necessary for them to best serve your needs.
May I profit from my use of a freelance attorney?
Yes, so long as 1) the overall fee charged to the client is reasonable and 2) the freelance attorney’s services are billed as attorney’s fees, not disbursements.
In 2000, the ABA Standing Committee on Ethics and Professional Responsibility considered whether lawyers who retain the services of freelance lawyers may add a surcharge when billing the client for the cost of services provided by the freelance lawyer. See ABA Comm. on Ethics & Prof'l Responsibility, Formal Op. 00-420 (Nov. 29, 2000) (Surcharge to Client for Use of a Contract Lawyer). The Committee affirmatively opined that, “[s]ubject to the Rule 1.5(a) mandate that ‘a lawyer’s fee shall be reasonable,’ a lawyer may, under the Model Rules, add a surcharge on amounts paid to a contract lawyer when services provided by the contract lawyer are billed as legal services.” Id. Conversely, “[i]f the costs associated with contracting counsel’s services are billed as an expense, they should not be greater than the actual cost incurred, plus those costs that are associated directly with the provision of services.” Id.
In 2008, the Committee confirmed its 2000 opinion, explaining that adding a surcharge to a freelance attorney’s fees “is not substantively different from the manner in which a conventional law firm bills for the services of its lawyers.” ABA Comm. on Ethics & Prof'l Responsibility, Formal Op. 08-451. By way of example, the Committee cited to the salary, employee benefits, office space, and other overhead costs the firm pays to support its lawyers, as well as the profit the firm earns from its lawyers’ services. See id. In the case of a freelance lawyer, the overhead costs are minimal; however, the hiring lawyer is entitled to compensation for his or her supervision of the freelance attorney’s work as well as a profit. Importantly, so long as the hiring attorney supervises the freelance attorney’s work or accepts it as his or her own, there is no need to disclose the surcharge to the client. See ABA Comm. on Ethics & Prof'l Responsibility, Formal Op. 00-420.
Indeed, it is commonly accepted for firms to add a surcharge when billing clients for the work of freelance or contract attorneys. A number of jurisdictions have affirmatively recognized and approved this practice. See, e.g., ABA Comm. on Ethics & Prof'l Responsibility, Formal Op. 00-420 (citing to ethics opinions in Virginia, Colorado, and the District of Columbia). In 2009, the U.S. District Court for the District of Connecticut approved a $245 hourly mark-up on contract attorney rates as reasonable, stating that "[t]oday it is not uncommon for an employing law firm to pay the temporary lawyer at one rate and charge that lawyer’s services to the client at a higher rate that covers overhead and a contribution to firm profits.” Carlson v. Xerox Corp., 596 F. Supp. 2d 400, 409-410 (D. Conn. 2009) (quoting In re Enron Corp. Sec., Deriv. & “ERISA” Litig., 586 F. Supp. 2d 732, 782-83) (S.D. Tex. 2008) (internal citation omitted).
May I ethically use a freelance attorney for legal work in a jurisdiction where she is not licensed?
Yes, so long as you supervise the freelance attorney's work.
Rule 5.5 prohibits a lawyer from practicing law in a jurisdiction where he or she is not licensed, or from assisting another lawyer in doing the same. Nonetheless, subsection (c) to the Rule provides that a lawyer may provide temporary legal services in a jurisdiction where he or she is not licensed if those services “are undertaken in association with a lawyer who is admitted to practice in this jurisdiction and who actively participates in the matter.” MODEL RULES OF PROF'L CONDUCT R. 5.5(c)(1). Services may be deemed “temporary” even where they are provided on a recurring basis or over an extended period of time. See MODEL RULES OF PROF'L CONDUCT R. 5.5 cmt. 6.
The ABA Standing Committee on Ethics and Professional Responsibility briefly addressed Rule 5.5 in the context of outsourced attorneys in its 2008 Opinion: “[o]rdinarily, an individual who is not admitted to practice law in a particular jurisdiction may work for a lawyer who is so admitted, provided that the lawyer remains responsible for the work being performed and that the individual is not held out as being a duly admitted lawyer.” ABA Comm. on Ethics & Prof'l Responsibility, Formal Op. 08-451.