Ten Things To Know About Freelance Law: #5 Disclosure to Client and Informed Consent

In this post, I explore the factors that a hiring lawyer must consider in determining whether there is a duty to inform the client of the use of a freelance lawyer and the specific steps that the hiring lawyer should take when such a duty exists.  Lawyers often want to know whether they need to or should tell their clients about the use of a freelance lawyer.  This post teases out the specific times when disclosure is required and the times when disclosure is not required, but may be warranted or advisable.

There are three major considerations in the disclosure analysis: (1) the financial arrangements between the hiring lawyer and freelance lawyer, (2) the level of supervision the hiring lawyer exercises over the freelance lawyer, and (3) the impact the use of a freelance lawyer has on the representation.

First, the hiring lawyer and freelance lawyer must consider the financial arrangement between them.   A client must give informed consent to fee-splitting.  C.R.P.C. 1.5(d).  The rule provides that “where there is a division of fees between lawyers not in the same firm, it is permitted” only if the lawyers assume joint responsibility or the division of the fee is proportional to the representation, the client gives informed consent in writing, and the total fee is reasonable.  Id. 

Because the freelance lawyer and hiring lawyer are, by definition, “not in the same firm,” many lawyers incorrectly assume that the rule requires disclosure whenever a freelance lawyer provides legal services.  Although it is true that the freelance lawyer and hiring lawyer will not be of the same firm, it does not necessarily follow that the freelance lawyer’s compensation is a “division of fees” that requires informed client consent.

The lawyers must determine whether “their financial arrangement constitutes a division of fees.” Colorado Bar Association, Formal Opinion 105, Opinion on Temporary Lawyers, May 22, 1999.  “A division of fee is a single billing to a client covering the fee of two or more lawyers who are not in the same firm.”  Id.   Fee-splitting in the freelance law context usually arises when the freelance lawyer’s “compensation is directly tied to or dependent on the client’s payment of fees.”  Id.  Examples of fee-splitting are when the gross fee paid by the client is split between the hiring lawyer and the freelance lawyer, when the freelance lawyer takes a portion of contingent fees, or the freelance lawyer takes a portion of non-contingent fees paid by the client.  If the financial arrangement constitutes fee-splitting, client disclosure is required.

It is more likely, however, that the financial arrangements between the hiring lawyer and freelance lawyer do not constitute fee-splitting and do not trigger disclosure.  Generally, these financial arrangements arise when the hiring lawyer or firm is obligated to pay the freelance lawyer regardless of client payment.  Examples of these arrangements are when the hiring lawyer pays the freelance lawyer an hourly rate, a flat rate by day or week, or a fixed fee per deliverable.  Colorado Bar Association, Opinion 105.  If the financial arrangement does not constitute fee-splitting, client disclosure is not mandated by Rule 1.5(d).

Second, the hiring lawyer must evaluate the level of supervision, if any, exercised over the freelance lawyer.  Both the American Bar Association and Colorado Bar Association Ethics Opinions agree that if the freelance lawyer works independently and without the close supervision of the hiring lawyer, the hiring lawyer must disclose the use of the freelance lawyer to the client.  American Bar Association, Standing Committee on Ethics and Professional Responsibility, Formal Opinion 88-356, Temporary Lawyers, December 16, 1988; Colorado Bar Association, Formal Opinion 105.   Where the hiring lawyer does not supervise the activities and work of the freelance lawyer, “the client, by retaining the [hiring] firm, cannot reasonably be deemed to have consented to the involvement of an independent lawyer.”  American Bar Association, Opinion 88-356.

Conversely, there is no duty to disclose if the hiring lawyer directly supervises the freelance lawyer’s activities and work or adopts the freelance lawyer’s work as their own.  American Bar Association, Opinion 88-356; Colorado Bar Association, Opinion 105.  There is no disclosure duty because “the client who retains a firm expects that the legal services will be rendered by lawyers and other personnel closely supervised by the firm.  Client consent to the involvement of firm personnel and disclosure to those personnel of confidential information necessary to the representation is inherent in the act of retaining the firm.”  American Bar Association, Opinion 88-356.

Third, the hiring lawyer must evaluate whether the use of a freelance lawyer constitutes a significant development in the representation.  A lawyer must “keep the client reasonably informed about the status of the matter.”  C.R.P.C. 1.4(a)(3).   Comment 3 to the rule explains that this includes “significant developments affecting the timing or substance of the representation.”  This a fact-dependent inquiry.  If a freelance lawyer provides substantive and ongoing litigation support, that is probably a significant development in the representation requiring disclosure and consent.  If a freelance lawyer provides a limited amount of legal research on a straightforward issue, that is probably not a significant development in the representation requiring disclosure and consent.

Although there are a few bright line rules requiring disclosure, there are no rules prohibiting disclosure.  Many of the rules of professional conduct promote and encourage open communication and transparency in the attorney-client relationship.  The hiring lawyer should use professional judgment to assess the client’s reasonable expectations and the nature of the freelance lawyer’s services.  If the hiring lawyer believes that using a freelance lawyer would affect the client’s expectations, the hiring lawyer should disclose the use of the freelance lawyer.  Colorado Bar Association, Opinion 105; Colorado Bar Association, Formal Opinion 121, Use of temporary lawyers and other professionals not admitted to practice in Colorado (“outsourcing”), June 16, 2009.

If the hiring lawyer determines that a duty to disclose exists, the client must give informed consent.  Informed consent requires that the hiring lawyer communicate “adequate information and explanation” about both the risks and alternatives to using a freelance lawyer.  C.R.P.C. 1.0(e).  If informed consent is required, the hiring lawyer must promptly notify the client.  C.R.P.C. 1.4(a)(1).  When communicating about the risks of using a freelance lawyer, the hiring lawyer may wish to discuss imputed conflicts of interest, competency, supervision, and confidentiality issues.  When communicating about the alternatives to using a freelance lawyer, the hiring lawyer may wish to discuss their workload, availability, fees, and specialization.

Many lawyers incorrectly assume that they must notify their client every time they involve a freelance lawyer in a case.  Instead, the hiring lawyer must evaluate their financial agreement with the freelance lawyer, the level of supervision exercised, the nature of the legal services, and client expectations, and promptly inform their client if necessary.

In the next post, I will explore issues related to conflicts of interest in the freelance law context.

 

Of course, rules and ethical obligations may vary by jurisdiction, and this post does not constitute legal advice.