Should You Take a Cue from Uber?

Getting your “side hustle” on is Uber’s way of suggesting that you join their team to earn extra money. Lawyers sometimes face this dilemma when first transitioning into private practice – giving up a regular paycheck is a high price to pay in exchange for the uncertainty of going solo.

For other lawyers, the practice of law is a second career.  Does this mean they are required to relinquish their first?

Not necessarily.  However, practicing on the side or in addition to another career, does raise some red flags.

Conflicts of Interest

Assuming your employer agrees to let you “moonlight” (and that’s a big assumption), you must address potential conflicts.  At first blush, you might think this concern applies only to lawyers who currently work in a law firm and wish to “work on the side” in a solo practice.  Not true!  If your other job is working as a real estate broker, mortgage broker, financial planner, psychologist, mediator, arbitrator, etc., you must also screen for conflicts.

In her article, Multidisciplinary practice: When Wearing Two Hats May Get You Burned  Helen Hierschbiel points out:

Recognizing and avoiding conflicts of interest is one of the more common concerns for lawyers who have side businesses, particularly when their clients do business with those other companies. Oregon RPC 1.7(a)(2) provides that a current conflict of interest exists if “there is a significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client, a former client or a third person or by a personal interest of the lawyer…” Thus, when there is a significant risk that a lawyer’s personal or other financial interests in a non-legal business will materially limit the lawyer’s responsibilities to a client, that lawyer has a conflict under RPC 1.7(a)(2).

In addition, when a lawyer’s side business is doing business with the lawyer’s client, consideration must be given to the limitations set forth in RPC 1.8(a), which provides more stringent requirements for obtaining client consent than those under RPC 1.7(b). RPC 1.8(a) provides:

A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client unless:

1. The transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing in a manner that can be reasonably understood by the client;

2. The client is advised in writing of the desirability of seeking and is given a reasonable opportunity to seek the advice of independent legal counsel on the transaction; and

3. The client gives informed consent, in a writing signed by the client, to the essential terms of the transaction and the lawyer’s role in the transaction, including whether the lawyer is representing the client in the transaction.

Note:  Learn more about this issue and other common conflict traps by attending Limiting Exposure to Conflicts on October 25, 2017.

Other Ethical Concerns

A “side practice” coupled with another job also raises potential concerns about advertising, solicitation, and fee sharing.  Here are Helen’s comments:

Advertising
“Oregon RPC 7.1 generally provides that any communication about a lawyer may not be false or misleading. Determining whether a statement is false may be simple, but assessing whether it is misleading can be more difficult. The cautious approach in making that assessment requires considering how the statement is likely to be interpreted by an unsophisticated consumer. Thus, OSB Formal Op 2005-108 concludes that a lawyer who has an active mediation practice may advertise the practice under “counselors — marriage, family, child and individual” sections of the yellow pages as long as the advertisement reflects the lawyer’s status as a lawyer offering mediation services.”

Solicitation
“Lawyers should also take care to observe the ban on in-person solicitation of legal business when providing non-legal services. The non-legal business may not be used to solicit clients with legal needs in a manner that violates RPC 7.3… (L)awyers would be wise to exercise extra caution when confronted in their non-legal business with an individual who has legal needs as well.”

Fee Sharing
“… (L)awyers should be mindful when setting up an ancillary business, not to allow non-lawyers any control or influence over their law practice.”

Employment Law and Liability Implications

Before you set up a side practice, check your employer’s policy and personnel manuals.  Some employers prohibit moonlighting altogether, others require preapproval of “outside employment activities.”  If you are a contract lawyer and a true independent contractor you should be completely free to have your own solo practice and perform contract work for other lawyers.  Be sure the principal lawyers who hire you agree.  Contact the OSB Professional Liability Fund for more information on setting up a contract practice.

Query:  If a lawyer commits malpractice in the course and scope of his or her “side practice,” could the lawyer’s primary law firm employer be held vicariously liable?  (Food for thought…. as clients have attempted to hold firms responsible for the negligence of “sole practitioners” who were leasing space in the firm’s office suite.)

Professional Liability Coverage

Lawyers engaged in the private practice of law in the State of Oregon are required to carry professional liability coverage through the Oregon State Bar Professional Liability Fund.  This requirement applies equally to full-time and part-time practitioners.  In other words, if you are a lawyer in private practice in Oregon (as defined in the PLF plan), it does not matter whether you provide legal services 50 hours per week or 10 hours per week – coverage is required in either case – and the cost of coverage does not vary based on the hours worked.  With that said, liability coverage in Oregon is complex.  Your best bet is to contact the Professional Liability Fund for more information.

Is it Worth it?

It may not be.  If you are not an active member of the Oregon State Bar, it will be necessary to pay bar dues.  If you intend to engage in the private practice of law and require professional liability coverage, the cost is currently $3500 per year (assuming coverage is not prorated and no discounts apply).

To assess whether a “side practice” makes sense, go through all the steps you would normally follow to set up a full-time law practice.  This includes forming an entity (or not), naming your business, choosing a space option, developing a business plan and budget, opening appropriate bank accounts, consulting with a CPA, creating (and implementing) a marketing plan, and establishing office systems.  If it sounds like your proposed “side practice” is getting more complicated by the minute, it is.  Don’t assume setting up a “side practice” is any less work than committing to the full-time private practice of law.

All Rights Reserved 2017 Beverly Michaelis
Eventbrite - Limiting Exposure to Conflicts

Can I Practice “On the Side?”

Lawyers sometimes ask if they can start a law practice “on the side” while maintaining their current position.  This question raises several red flags.

Conflicts of Interest

Assuming your employer agrees to let you “moonlight” (and that’s a big assumption), you must address potential conflicts.  At first blush, you might think this concern applies only to lawyers who currently work in a law firm and wish to “work on the side” in a solo practice.  Not true!  If your other job is working as a real estate broker, mortgage broker, financial planner, psychologist, mediator, arbitrator, etc., you must also screen for conflicts.

In her article, Multidisciplinary practice: When Wearing Two Hats May Get You Burned  OSB General Counsel Helen Hierschbiel points out:

Recognizing and avoiding conflicts of interest is one of the more common concerns for lawyers who have side businesses, particularly when their clients do business with those other companies. Oregon RPC 1.7(a)(2) provides that a current conflict of interest exists if “there is a significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client, a former client or a third person or by a personal interest of the lawyer…” Thus, when there is a significant risk that a lawyer’s personal or other financial interests in a non-legal business will materially limit the lawyer’s responsibilities to a client, that lawyer has a conflict under RPC 1.7(a)(2).

In addition, when a lawyer’s side business is doing business with the lawyer’s client, consideration must be given to the limitations set forth in RPC 1.8(a), which provides more stringent requirements for obtaining client consent than those under RPC 1.7(b). RPC 1.8(a) provides:

A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client unless:

1. The transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing in a manner that can be reasonably understood by the client;

2. The client is advised in writing of the desirability of seeking and is given a reasonable opportunity to seek the advice of independent legal counsel on the transaction; and

3. The client gives informed consent, in a writing signed by the client, to the essential terms of the transaction and the lawyer’s role in the transaction, including whether the lawyer is representing the client in the transaction.

Other Ethical Concerns

A “side practice” coupled with another job also raises potential concerns about advertising, solicitation, and fee sharing.  Here are Helen’s comments:

Advertising
“Oregon RPC 7.1 generally provides that any communication about a lawyer may not be false or misleading. Determining whether a statement is false may be simple, but assessing whether it is misleading can be more difficult. The cautious approach in making that assessment requires considering how the statement is likely to be interpreted by an unsophisticated consumer. Thus, OSB Formal Op 2005-108 concludes that a lawyer who has an active mediation practice may advertise the practice under “counselors — marriage, family, child and individual” sections of the yellow pages as long as the advertisement reflects the lawyer’s status as a lawyer offering mediation services.”

Solicitation
“Lawyers should also take care to observe the ban on in-person solicitation of legal business when providing non-legal services. The non-legal business may not be used to solicit clients with legal needs in a manner that violates RPC 7.3… (L)awyers would be wise to exercise extra caution when confronted in their non-legal business with an individual who has legal needs as well.”

Fee Sharing
“… (L)awyers should be mindful when setting up an ancillary business, not to allow non-lawyers any control or influence over their law practice.”

Employment Law and Liability Implications

Before you set up a side practice, check your employer’s policy and personnel manuals.  Some employers prohibit moonlighting altogether, others require preapproval of “outside employment activities.”  If you are a contract lawyer and a true independent contractor you should be completely free to have your own solo practice and perform contract work for other lawyers.  Be sure the principal lawyers who hire you agree.  Review the Practical Contract Lawyering CLE on the PLF Web site > Programs on CD/DVD for more information on setting up a contract practice.  Query:  If a lawyer commits malpractice in the course and scope of his or her “side practice,” could the lawyer’s primary law firm employer be held vicariously liable?  (Food for thought…. as clients have attempted to hold firms responsible for the negligence of “sole practitioners” who were leasing space in the firm’s office suite.)

Professional Liability Coverage

Lawyers engaged in the private practice of law in the State of Oregon are required to carry professional liability coverage through the Oregon State Bar Professional Liability Fund.  This requirement applies equally to full-time and part-time practitioners.  In other words, if you are a lawyer in private practice in Oregon (as defined in the PLF plan), it does not matter whether you provide legal services 50 hours per week or 10 hours per week – coverage is required in either case – and the cost of coverage does not vary based on the hours worked.  With that said, liability coverage in Oregon is complex.  Your best bet is to contact our coverage experts Jeff Crawford or Emilee Preble for more information.

Is it Worth it?

It may not be.  If you are not an active member of the Oregon State Bar, it will be necessary to pay bar dues.  If you intend to engage in the private practice of law and require professional liability coverage, the cost is $3500 per year (assuming coverage is not prorated and no discounts apply).  To assess whether a “side practice” makes sense, go through all the steps you would normally follow to set up a full-time law practice.  This includes forming an entity (or not), naming your business, choosing a space option, developing a business plan and budget, opening appropriate bank accounts, consulting with a CPA, creating (and implementing) a marketing plan, and establishing office systems.  If it sounds like your proposed “side practice” is getting more complicated by the minute, it is.  Don’t assume setting up a “side practice” is any less work than committing to the full-time private practice of law.

Now What?

Oregon lawyers are welcome to contact the practice management advisors at the PLF any time with questions about “side practice” or related issues.  If you are outside Oregon, follow this link to find a practice management advisor in your state.

Copyright 2012 Beverly Michaelis

Sneak Preview: Virtual Practice in Oregon

Excerpted from my upcoming article in the Oregon State Bar Bulletin,
Unbundling Legal Services in the Twenty-First Century:

Providing limited legal services is not a new concept.  Transactional lawyers have long served in the role of document reviewer or preparer.  So how is unbundling different? It takes the idea one step further by employing a team approach in which the lawyer and client decide who will do what based on the legal services required by the client’s case.  The client takes a much more active role in the matter and often assumes responsibility for pro se court filings and appearances.  Add the twenty-first century twist of delivering unbundled services online, and some issues arise.

Ethics Revisited

Limited-scope representation is expressly permitted in Oregon so long as “the limitation is reasonable under the circumstances and the client gives informed consent.”  Oregon Rule of Professional Conduct 1.2(b). Whether unbundled services are “reasonable under the circumstances” will require your professional judgment.  For a complete discussion of the ethical implications in providing unbundled services, including restrictions on ghostwriting or scripting specific messages for clients engaged in settlement negotiations, see Helen Hierschbiel, The Ethics of Unbundling: How to Avoid the Land Mines of “Discrete Task Representation.”

Screening Clients Just Got Harder

In a virtual or online practice, clients are unseen.  You will need to invest extra effort to build rapport and gauge the likely success of your working relationship via e-mail or online contacts.  If you intend to practice virtually, checklists, tip sheets, and interview forms crafted around traditional screening criteria will be crucial to your success.  Review the resources listed at the end of this article and visit the sites of successful and respected virtual practitioners, like Stephanie Kimbro.

The Bona Fide Office Rule

Oregon has no “bona fide office rule,” requiring a brick-and-mortar office space to conduct a law practice.  If you practice in other states, the rules may be different. At least one jurisdiction has determined that virtual offices do not meet that state’s bona fide office requirement.

With that said, the same considerations involved in unbundling apply to online delivery of legal services.   (My forthcoming article analyzes unbundling in detail.)

Any virtual law office must also address:

  • Marketing restrictions
  • Full disclosure of the jurisdictional limits of practice
  • Client confidentiality (Any online portal that permits communication, collaboration, or document exchange with clients must be secure.)
  • Publication of terms and conditions identifying when an attorney-client relationship is formed

See Helen Hierschbiel, Internet Marketing: Rules of the Road and Odds & Ends: Safeguarding Client Information in a Digital World for more information regarding online marketing, jurisdictional disclosure, and protection of confidential client information in the cloud.

Online Practice and Lawyer Referral

Would a lawyer practicing virtually be eligible to receive referrals from Oregon’s LRS, absent a physical office?  The answer is no.  Clients referred by the LRS are specifically told to expect an “in-office” consultation.  See also LRS Policies and Procedures E.(3):

No duplicate registrations shall be made outside of the city where the attorney maintains his or her practice unless: a) the attorney maintains a second physical location where attorney-client meetings may take place; or b) the attorney’s office is located within two (2) miles of the border between two locations.

Online Practice and Professional Liability Fund (PLF) Coverage

Only an Oregon attorney engaged in the private practice of law whose principal office is in Oregon is covered by the PLF Claims Made Plan.  ORS 9.080(2).  But what if the attorney has no office in which he or she meets with clients? PLF Policy 3.180(C) provides:

If an attorney has no office as defined in subsection (B) above, the attorney’s principal office as defined by ORS 9.080 (2)(a) will be defined as the attorney’s principal residence if the attorney is an active member of the bar association of the state of residence; otherwise, the attorney’s principal office will be deemed to be in Oregon unless the attorney affirmatively demonstrates to the PLF that the attorney does not engage in the private practice of law in Oregon. (Emphasis added.)

PLF Policy 3.180 is available on the PLF Web site. Select Policies and Forms under Primary Coverage.  If you have questions regarding PLF coverage, call Jeff Crawford or Kimi Nam at (503) 639-6911 or (800) 452-1639.

Resources for Online Delivery of Unbundled Services

For additional information regarding virtual office practice, visit the ABA eLawyering Task Force and Stephanie Kimbro’s Virtual Law Practice Blog.  Delivering Legal Services Online, Stephanie Kimbro’s upcoming book, should be available soon.  Also see The Virtual Law Firm: Benefits, Costs, and Ethical Pitfalls to Avoid from the ABA.   Find more ABA Products related to virtual practice by searching the ABA Web store. ABA products can be purchased at a discount through the Professional Liability Fund. For more information, visit the PLF Web site.  Select ABA Products under Loss Prevention.  Vendors of online platforms for virtual offices include Virtual Law Office Technology, LLC and Direct Law.

Conclusion

If you are a brick-and-mortar lawyer, the potential traps of providing unbundled legal services are well known.  If you are one of the pioneers providing legal services online, the roadmap is a work in progress. Stay tuned.

Copyright 2010 Beverly Michaelis