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2 Practical Law Office Management, Third Edition Brent D. Roper Vice President, Career Education Strategic Business Unit: Dawn Gerrain Acquisitions Editor: Shelley Esposito Senior Product Manager: Melissa Riveglia Editorial Assistant: Melissa A. Zaza Director of Production: Wendy A. Troeger Content Project Manager: Matthew J. Williams Director of Marketing: Wendy E. Mapstone Marketing Channel Manager: Gerard McAvey Marketing Coordinator: Jonathan Sheehan Cover Design: Joe Villanova Cover Images: Steve Cole/Getty Images JG Photography/Alamy Janis Christie/Getty Images Nick Koudis/Getty Images Chad Baker/Getty Images 2007, 2002 Delmar, Cengage Learning ALL RIGHTS RESERVED. No part of this work covered by the copyright herein may be reproduced, transmitted, stored or used in any form or by any means graphic, electronic, or mechanical, including but not limited to photocopying, recording, scanning, digitizing, taping, Web distribution, information networks, or information storage and retrieval systems, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the publisher. For product information and technology assistance, contact us at Cengage Learning Customer & Sales Support, For permission to use material from this text or product, submit all requests online at Further permissions questions can be ed to Library of Congress Control Number: ISBN-13: ISBN-10: X Delmar Executive Woods 5 Maxwell Drive Clifton Park, NY USA Cengage Learning is a leading provider of customized learning solutions with office locations around the globe, including Singapore, the United Kingdom, Australia, Mexico, Brazil, and Japan. Locate your local office at Cengage Learning products are represented in Canada by Nelson Education, Ltd. To learn more about Delmar, visit Purchase any of our products at your local bookstore or at our preferred online store Notice to the Reader Publisher does not warrant or guarantee any of the products described herein or perform any independent analysis in connection with any of the product information contained herein. Publisher does not assume, and expressly disclaims, any obligation to obtain and include information other than that provided to it by the manufacturer. The reader is expressly warned to consider and adopt all safety precautions that might be indicated by the activities described herein and to avoid all potential hazards. By following the instructions contained herein, the reader willingly assumes all risks in connection with such instructions. The publisher makes no representations or warranties of any kind, including but not limited to, the warranties of fitness for particular purpose or merchantability, nor are any such representations implied with respect to the material set forth herein, and the publisher takes no responsibility with respect to such material. The publisher shall not be liable for any special, consequential, or exemplary damages resulting, in whole or part, from the readers use of, or reliance upon, this material. Printed in the United States of America

3 THE LEGAL TEAM, LAW PRACTICES, AND LAW FIRM GOVERNANCE 1 Chapter Objectives After you read this chapter, you should be able to: Discuss the titles and duties of each member of the legal team. Explain the trends in legal assistant salaries. Discuss the different types of law practices. Identify alternative law office organizational structures. 1

4 2 CHAPTER 1 The law firm was more than 40 years old and was well established in the legal community. Recently, however, the firm had moved to a particularly high-rent building and decided to spend substantially more on technology than it had originally planned; as a result, expenses were exploding and the firm was burdened with expensive debt. Employee turnover was growing, and productivity and client billings were down. Governance of the firm was bureaucratic and unresponsive to business demands. The firm had refused to hire professional administrators, and partners were fighting among themselves. The firm had no marketing strategy and new clients were not coming to the firm; the organization had grown dependent on two large clients for most of its business. Unexpectedly, one of the clients moved its business to a competing law firm. The client stated that it was not pleased with the quality of legal services it was receiving, so it moved to another firm who had worked hard to obtain their business. Management decided that a bold move was necessary to save the firm. A legal management consulting firm was hired. A number of professional legal administrators were hired to run the business. The firm adopted a new governance structure that was streamlined and decisive. Clients were interviewed to see how the firm s services could be improved. Analysis was conducted to discover niche markets the firm could expand into and a carefully constructed marketing plan was implemented. The idea of merging with a stronger law firm that was a good fit was explored. Detailed budgets were developed to help control expenses and project income. All of the partners and administrators participated in creating a long-term, strategic business plan. Discussions were held with the staff to explore ways to increase retention, revenues, and productivity while trimming costs. While the firm still had a long way to go, it was on its way to recovery. legal team A group made up of attorneys, administrators, law clerks, librarians, legal assistants, secretaries, clerks, and other third parties. Each provides a distinct range of services to clients and has a place on the legal team. Law offices are organizations that provide legal services to clients, but they are fundamentally a business. Like any business, their function is to make money, operate at a profit, and earn money for their owners. This chapter introduces you to the legal team members who provide services to clients and management to a law office; salary trends of legal assistants; different types of law practices that operate in the legal field; and various organizational structures used by law firms. THE LEGAL TEAM In a law office, many people make up the legal team. The legal team consists of attorneys, administrators, law clerks, librarians, legal assistants, secretaries, clerks, and other third parties (see Figure 1-1). Each person provides a distinct range of

5 The Legal Team, Law Practices, and Law Firm Governance 3 Figure 1-1 The Legal Team Other Expert Witness Investigator Litigation Support Bureau Consultant Attorneys Partner/Shareholders Managing partner Associates Lateral hires Staff attorney Contract attorney Of Counsel Legal Assistants Legal Asst. Litigation Legal Asst. Managing Legal Asst. Freelance Legal Asst. Administrators Legal Administrator Chief Financial Officer Human Resources Mgr. Marketing Director Information System Dir. Facilities/Office Serv. Mgr. LEGAL TEAM Secretaries Legal Secretary Word Processor Receptionist Specialists Office Manager Computer Specialist Accounting Specialist Bookkeeper Records Manager Payroll Specialist Analyst Clerks File Clerk Calendar Clerk Copy Clerk Mail Clerk Library Clerk Messenger Law Librarian & Law Clerk

6 4 CHAPTER 1 services to clients, and each has his or her place on the legal team. The positions and job duties in any law office depend on the type and size of the office. A list of job titles and a general description of common duties and responsibilities are provided in this section. It should be noted that job titles are just that they are titles only. Attorneys and law office administrators are far more impressed with a person s actual performance than with a job title. Treat everyone, from the senior partner to the mail delivery person, with the same degree of respect and courtesy due any member of the legal team. 1 attorneys Licensed professionals who counsel clients regarding their legal rights, represent clients in litigation, and negotiate agreements between clients and others. partner or shareholder An owner in a private law practice who shares in its profits and losses. managing partner An attorney in a law firm chosen by the partnership to run the firm, make administrative decisions, and set policies. associate attorney Attorney who is a salaried employee of the law firm, does not have an ownership interest in the firm, does not share in the profits, and has no vote regarding management decisions. Attorney Attorneys counsel clients regarding their legal rights, represent clients in litigation, and negotiate agreements between clients and others. Depending on the size of the law office, attorneys may also have administrative duties. There are several kinds of attorneys. PARTNER/SHAREHOLDER A partner or shareholder is an attorney-owner in a private law practice who shares in its profits and losses. In the partnership form of business, an owner of the business is called a partner. In the corporate form of business, an owner is called a shareholder. Partners and shareholders serve primarily the same purpose; it is only the legal structure that is different. For simplicity, partner will be used to refer collectively to partners and shareholders, but shareholder could also have been used. Partners attend partnership meetings and vote in the management decisions of the firm. Partners must also make monetary contributions to the firm if the need arises. Partners are sometimes called equity partners, since they share in the profits or losses of the firm. To become a partner, an attorney must either be an attorney who founded the firm or be voted into the position by the existing partners. Typically, partners do not receive a salary but may receive a periodic draw, which is an advance against future profits. In some firms, a managing partner is chosen by the partnership to run the firm and make administrative decisions and set policies. The managing partner reports to the partnership on the progress of the firm. Managing partners are typically elected to serve for a set amount of time, such as one or two years. Depending on the size of the firm, a managing partner may spend part or all of his or her time on management duties. In smaller law offices, a managing partner will practice law in addition to running the firm, while in large firms, managing the practice is typically a full-time job. ASSOCIATE ATTORNEYS An associate attorney does not have an ownership interest in the law firm and does not share in the profits. The associate is only an employee of the firm who receives a salary and has no vote regarding management

7 The Legal Team, Law Practices, and Law Firm Governance 5 decisions. Associates can be hired directly out of law school or come from other firms. Associates who are hired from other firms are known as lateral hires or lateral hire associates. Associates who are candidates for a future partnership are said to be on a partnership track. An associate is usually with the firm between 5 and 10 years before he or she is a candidate for a partnership position, depending on the size of the firm. In large metropolitan firms, the time may be longer. An associate passed over for partnership may or may not leave the firm to practice elsewhere. Sometimes, to keep good associate attorneys who have nevertheless been passed over for partnership, the firm creates a position known as a nonequity partner. A nonequity partner does not share in the profits or losses of the business but may be included in some aspects of the management of the firm and may be entitled to other benefits not given to associates. A staff attorney is another type of associate. A staff attorney is an attorney hired by a firm with the knowledge and understanding that he or she will never be considered for partnership. Finally, a contract attorney is an associate attorney who is temporarily hired by the law office for a specific job or period. When the job or period is finished, the relationship with the firm is over. OF COUNSEL The of counsel position is a flexible concept but generally means that the attorney is affiliated with the firm in some way, such as a retired or semiretired partner. Of counsel attorneys lend their names to a firm for goodwill and prestige purposes, in order to attract additional clients and business to the firm. An of counsel attorney may be paid on a per-job basis or may be an employee of the firm. He or she does not usually share in the profits of the firm. The of counsel arrangement is also used when an attorney is considering joining a firm as a partner and wants to work on a trial basis first. nonequity partner One who does not share in the profits or losses of the firm but may be included in some aspects of management and may be entitled to certain benefits. staff attorney An attorney hired by a firm with the knowledge and understanding that he or she will never be considered for partnership. contract attorney An attorney temporarily hired by the law office for a specific job or period. When the job or period is finished, the relationship with the firm is over. of counsel An attorney affiliated with the firm in some way, such as a retired or semiretired partner. Not only are more firms beginning to see the essential role of administrators, and are delegating to them more and more administrative functions, but there is an accelerating trend toward actually giving them power in addition to their authority. 2 Legal Administrators Legal administrators are usually found in medium and large firms, although they are beginning to be used in small firms as well. Law office administrators are responsible for some type of law office administrative system such as general management, finance and accounting, human resources, marketing, or computer systems. Legal administrators are typically nonattorneys who have degrees in business or related fields or who have been promoted through the ranks. Legal administrators have a broad range of power to make management decisions with the approval of the partnership. Most report directly to a committee or a partner. Legal administrators draft annual budgets, prepare and interpret management reports, supervise the fiscal operations of the business, hire and fire support staff, legal administrator Person responsible for some type of law office administrative system, such as general management, finance and accounting, human resources, marketing, or computer systems.

8 6 CHAPTER 1 and are responsible for implementing effective systems. In short, legal administrators are managers hired to relieve partners or managing committees of management burdens. Experienced legal assistants are sometimes promoted to administrative positions; administration can be a positive career move for legal assistants with good management skills. An excellent source of information regarding law office administration is the Association of Legal Administrators (ALA) [ Legal administrators come in a variety of types and with a range of titles. In smaller firms, they may have a generalist title and a wide range of duties (see Figure 1-2). In larger firms, there may be an administrator for each specific business function in the law practice, such as chief financial officer, human resources manager, marketing director, information systems director, facilities and office services manager, and so forth. A legal administrator may attend partnership or committee meetings, direct the accounting and billing functions, hire and terminate staff, make purchasing decisions, and much more. legal assistants A distinguishable group of persons who assist attorneys in the delivery of legal services. They have knowledge and expertise regarding the legal system and substantive and procedural law that qualifies them to do work of a legal nature under the supervision of an attorney. Legal Assistants Legal assistants, also known as paralegals, are a distinguishable group of persons who assist attorneys in the delivery of legal services. Through formal education, training, and experience, legal assistants have knowledge and expertise regarding the legal system and substantive and procedural law that qualify them to do work of a legal nature under the supervision of an attorney. 3 This definition is used by the National Association of Legal Assistants (NALA), but it is not the only one in use today. Figure 1-3 shows four separate definitions for a legal assistant or paralegal as defined by the American Bar Association (ABA), National Federation of Paralegal Associations (NFPA), National Association of Legal Assistants (NALA), and American Association for Paralegal Education (AAfPE). The terms legal assistant and paralegal often are used interchangeably, with no difference in meaning. This text, as well as the ABA, NFPA, and NALA, uses these terms interchangeably (see Figure 1-3). However, in some parts of the country, and in some legal organizations, there are various distinctions between the two terms. A 2004 NALA survey found that 30 percent of participants were referred to as legal assistants by their employers, while 62 percent were called paralegals. With the steady growth of the legal assistant profession, legal assistants have become an integral part of modern law practice. 4 The ABA Standing Committee on Legal Assistants recently stated As we approach [and enter] the 21st century, one of the highest priority goals of the American Bar Association is to increase access to legal services...one of the most effective ways to improve access to legal services is through the expanded utilization of well-qualified legal assistants who, with proper training and supervision, can be delegated work that would otherwise have to be done by a lawyer. 5

9 The Legal Team, Law Practices, and Law Firm Governance 7 Summary of Responsibilities Manages the planning and business functions, as well as the overall operations of a law office. Reports to the managing partner, management committee, or chairperson of the board, and participates in management meetings. In addition to general responsibility for financial planning and controls, personnel administration, and systems and physical facilities, the legal administrator identifies and plans for the changing needs of the organization, shares responsibility with the appropriate partners or owners for strategic planning, practices management and marketing, and contributes to cost-effective management throughout the organization. Whether directly or through a management team, the legal administrator is responsible for much or all of the following: Figure 1-2 Legal Administrator Job Description Source: Association of Legal Administrators Financial Management Including planning, forecasting, budgeting, variance analysis, profitability analysis, financial reporting, general ledger accounting, rate determination, billing and collections, cash flow control, banking relationships, investment, tax planning, tax reporting, trust accounting, payroll, pension plans, and other financial management functions. Human Resource Management Including recruiting, selection, training and development, performance evaluation, salary administration, employee relations, motivation, counseling, disciplining, discharging, benefits administration, workers compensation, personnel data systems, job design, resource allocation, and other human resource management functions for the legal, paralegal, and support staff. Systems Management Including systems analysis, operational audits, cost/benefit analysis, computer systems design, programming and systems development, information services, records management, library management, office automation, document construction systems, information storage and retrieval, telecommunications, litigation support, legal practice systems, and other systems management functions. Facilities Management Including space planning and design, purchasing, inventory control, reprographics, records storage, reception/switchboard services, telecommunications, mail, messenger, and other facilities management functions. As a member of the organization s management team, the legal administrator manages and/or contributes significantly to the following: General Management Including strategic and tactical planning, business development, risk management, quality control, organizational development, firm planning processes, and other general management functions. Practice Management Including lawyer recruiting, lawyer training and development, legal assistant supervision, work product, quality control, professional standards, substantive practice systems, and other practice management functions. Marketing Including management of client profitability analysis, forecasting of business opportunities, planning client development, marketing legal services, and enhancing the firm s visibility and image in the desired markets.

10 8 CHAPTER 1 Figure 1-3 Definitions of a Legal Assistant/Paralegal Organization American Bar Association (ABA) National Federation of Paralegal Associations (NFPA) National Association of Legal Assistants (NALA) American Association for Paralegal Education (AAfPE) Definition of Legal Assistant or Paralegal A legal assistant or paralegal is a person, qualified by education, training, or work experience, who is employed or retained by a lawyer, law office, corporation, governmental agency, or other entity, and who performs specifically delegated substantive legal work for which a lawyer is responsible. ABA Standing Committee on Legal Assistants. Reprinted with permission. A paralegal/legal assistant is a person qualified through education, training, or work experience to perform substantive legal work that requires knowledge of legal concepts and is customarily, but not exclusively, performed by a lawyer. This person may be retained or employed by a lawyer, law office, governmental agency or other entity or may be authorized by administrative, statutory, or court authority to perform this work. Reprinted with permission of NFPA. Legal assistants, also known as paralegals, are a distinguishable group of persons who assist attorneys in the delivery of legal services. Through formal education, training, and experience, legal assistants have knowledge and expertise regarding the legal system and substantive and procedural law which qualify them to do work of a legal nature under the supervision of an attorney. Reprinted with permission of the National Association of Legal Assistants S. Boston #200, Tulsa, OK Paralegals perform substantive and procedural legal work as authorized by law, which work, in the absence of the paralegal, would be performed by an attorney. Paralegals have knowledge of the law gained through education, or education and work experience, which qualifies them to perform legal work.paralegals adhere to recognized ethical standards and rules of professional responsibility. Reprinted with the permission of the National Association for Paralegal Education. freelance/contract legal assistant Works as an independent contractor with supervision by and/or accountability to an attorney; is hired for a specific job or period. The ABA has also recognized the contribution of legal assistants to the legal profession by creating an associate membership category for them, which allows them to participate in relevant activities and join sections and divisions of the ABA. Many state and county bar associations also allow legal assistants to participate as associate members in their organizations. Legal assistants have two of their own national professional associations NFPA and NALA among others that they may join. Figure 1-4 shows NALA s home page. Both NALA and NFPA offer legal assistants many resources and benefits. Although legal assistants may perform many tasks, they are strictly prohibited from giving legal advice to clients, from representing clients in court proceedings, from accepting client cases, and from setting a fee in a matter. This is covered in more detail in Chapter 3. A traditional legal assistant works under the direct supervision of an attorney and is accountable to that attorney. There are also other nontraditional legal assistants, including freelance, contract, and independent legal assistants, also called legal technicians. A freelance or contract legal assistant works as an independent

11 The Legal Team, Law Practices, and Law Firm Governance 9 Image not available due to copyright restrictions contractor with supervision by and/or accountability to an attorney. These legal assistants are self-employed and market and sell their services to legal organizations on a per-job basis. While they work under the supervision of an attorney, they may do so off-site and for a number of attorneys or legal organizations at the same time. I like the freedom of movement and being able to be my own boss and set my own hours [as a freelance legal assistant]. I m not restricted to a set schedule, though of course I set appointments with the attorneys or their clients. I can come and go as I please. The client s [i.e., the law firm s] only concern is that I get the work done. I charge an hourly rate, which the law firms bill to their clients. It s a win/win situation. A freelance legal assistant 6 Independent legal assistants, or legal technicians, provide services to clients in regard to a process in which the law is involved and for whose work no lawyer is accountable. 7 Legal technicians assist in providing self-help services to the public. Because they do not work under the auspices of an attorney, they are often accused of ethical misconduct and subject to statutes against the unauthorized practice of law; this is discussed in detail in Chapter 3. Some larger legal organizations have legal assistant managers who oversee the legal assistant program at the firm and are responsible for administering all firm independent legal assistant Provides services to clients in which the law is involved, but is not accountable to a lawyer. legal assistant manager Oversees a legal assistant program in a legal organization, including preparing work plans, hiring, training, and evaluating legal assistants.

12 10 CHAPTER 1 Figure 1-5 General Education Degree Attained for Practicing Legal Assistants Response Percent Responses High school diploma 18% 242 Associate degree 33% 436 Bachelor s degree 44% 578 Master s degree 5% 69 Ph.D. 1% 6 Source: National Association of Legal Assistants, 2004 National Utilization and Compensation Survey Report, Table 1.4, General Education Degree Attained policies pertaining to legal assistants. The firm s legal assistants report either directly or indirectly to the legal assistant manager. Legal assistant managers develop work plans and standards, prepare staffing plans and bill rates, recruit and hire, provide training and development, monitor workloads, and conduct evaluations of the legal assistants. Arecent survey by the National Association of Legal Assistants found that more than 80 percent of respondents had earned some kind of college degree (see Figure 1-5). Both NFPA and NALA have voluntary certification exams, and some states offer certifications as well. Legal Assistant Roles, Responsibilities, and Employment People unfamiliar with the legal profession might assume that legal assistants spend a great deal of time in court. This is a common misconception. No matter what kind of law a law office practices, a considerable amount of a legal assistant s time is spent researching background information, plowing through reams of files, summarizing depositions, drafting pleadings and correspondence, and organizing information. It is not always exciting, but it is essential work in every case; often, the facts gathered, researched, and presented determine a case s outcome. Many of the legal assistant s duties don t involve a courtroom, such as preparation of wills, real estate closing transactions, drafting discovery, and preparation of business corporation papers. Defining the work legal assistants do is not an easy task, given the wide variety and versatility of the profession. Figure 1-6 shows some of the more frequent duties legal assistants perform. Notice that assisting at trial is the lowest on the chart. Although there is diversity among legal assistant job duties, nearly all legal assistants spend a considerable portion of their time drafting documents and communicating either in writing or orally. A majority of the legal assistants responding to the survey in Figure 1-6 draft letters and case correspondence, work with and manage files and cases, calendar and keep track of case deadlines, work with computer systems, draft pleadings and formal court documents, work on miscellaneous office matters, and work with clients on a daily basis. Most legal assistants practice in a particular area of the law. Figure 1-7 shows the areas in which legal assistants most frequently practice. Notice in Figure 1-7 that 45 percent of the legal assistants surveyed indicated that they specialized

13 The Legal Team, Law Practices, and Law Firm Governance 11 Duty Daily Weekly Monthly Rarely Total Responses* Draft correspondence 74% 18% 5% 4% 1214 Case management 72% 18% 6% 4% 1036 Calendar deadlines 63% 21% 6% 10% 1079 Automation systems/ 56% 16% 12% 17% 936 computers Draft pleadings 46% 30% 11% 13% 994 Assist with client contact 44% 25% 17% 15% 1096 Office matters 44% 21% 14% 21% 991 General, factual research 40% 37% 17% 7% 1134 Document analysis/ 36% 32% 19% 13% 993 summary Court filings 33% 33% 13% 21% 950 Investigation 26% 31% 23% 21% 882 Personnel management 22% 13% 13% 53% 606 Client/witness interviews 14% 26% 24% 36% 871 Train employees 13% 0% 25% 50% 708 Legal research 12% 25% 31% 33% 996 Prepare/attend closings 8% 9% 18% 65% 509 Law library maintenance 4% 7% 16% 74% 528 Deposition summaries 2% 10% 28% 60% 730 Prepare/attend depositions 2% 16% 32% 50% 672 Assist/attend mediations 1% 6% 27% 67% 528 Assist at trial 1% 2% 19% 79% 743 Figure 1-6 Legal Assistant Duties Source: National Association of Legal Assistants, 2004 National Utilization and Compensation Survey Report, Table 2.16, Functions and Duties/Frequencies (Respondents were asked to skip the item if their work does not require the duty) in civil litigation. Litigation provides many employment opportunities for legal assistants. In addition to practicing in many different areas of the law, legal assistants are employed in different kinds of legal organizations (see Figure 1-8). Close to threefourths of all legal assistants work in private law offices. Figure 1-8 also shows that about 63 percent of the legal assistants surveyed worked in relatively small firms with 10 or fewer attorneys. The size of the law office has an effect on the job duties and salaries of legal assistants. In small law offices, legal assistants usually compose and draft their own documents on a computer and do their own secretarial tasks. In larger firms, legal assistants may supervise secretarial personnel or share secretary staff with other legal professionals. Figure 1-8 shows that about 46 percent of all legal assistants are supervised by an attorney and about 43 percent are supervised by an administrator, manager, or department head. Another interesting fact shown in Figure 1-8 is that as the number of attorneys in firms increase, the ratio of attorneys to legal assistants goes down dramatically. In a sole practitioner s office, the ratio of attorneys to legal assistants is 0.7:1, but in a firm with more than 100 attorneys, the ratio is 5:1. Legal Assistant Compensation Figure 1-9 contains a national survey of legal assistant compensation. This survey found that the average compensation for all legal assistants was $46,862/year. The

14 12 CHAPTER 1 Figure 1-7 Legal Assistant Specialty Areas of Practice Source: National Association of Legal Assistants, 2004 National Utilization and Compensation Survey Report, Table 2.20, Specialty Areas of Practice by Number of Responses Percent of Respondents Selecting Number of Specialty Areas the Specialty Respondents Civil litigation 45% 648 Corporate 29% 421 Personal injury 26% 372 Contracts 24% 351 Real estate 23% 337 Administrative/government/public 19% 273 Probate/estates 18% 263 Trusts and estates 18% 259 Office management 17% 245 Insurance 17% 241 Employment/labor law 17% 239 Medical malpractice 16% 232 Bankruptcy 15% 216 Collections 13% 188 Products liability 13% 185 Family law 13% 183 Intellectual property 12% 170 Worker s compensation 12% 166 Banking/finance 11% 152 Criminal 10% 137 Mergers/acquisitions 9% 134 Tax 8% 108 Environmental law 7% 103 Securities/antitrust 7% 98 Oil and gas 5% 74 Legislative lobbying 5% 74 Social Security 5% 71 Energy/utility 5% 70 Immigration 5% 68 Fair Labor Standards Act Federal law that sets minimum wage and overtime pay requirements for employees. survey found that legal assistants in tax intellectual property, securities/antitrust, and corporate law departments receive higher compensation on average than do legal assistants in other areas of practice. The survey also found that 1) legal assistants with more experience earned higher pay than those with less experience, 2) legal assistants working in the far west and New England/eastern areas earned higher compensation than those working in other areas of the U.S., and 3) legal assistants working in smaller firms tended to make less money than legal assistants working in large law firms (see Figure 1-9). EXEMPT v. NONEXEMPT The Fair Labor Standards Act (FLSA) is a federal law that sets minimum wage and overtime pay requirements for employees. It requires that overtime pay (one-and-one-half times their normal rate) be paid to employees who work in excess of 40 hours per week. Employees do not need to be

15 The Legal Team, Law Practices, and Law Firm Governance 13 Employer Percent Respondents Private law firm 69% 928 Corporation 14% 182 Public sector/government 8% 101 Insurance company 2% 26 Self-employed 2% 21 Nonprofit organization 1% 17 Bank 1% 16 Court system 1% 15 Health/medical 1% 8 Figure 1-8 Legal Assistant Employment Statistics Source: National Association of Legal Assistants, 2004 National Utilization and Compensation Survey Report, Table 2.1, Type of Employer Number of Attorneys Percent Respondents 1 (sole practitioner) 15% % % % % % 71 More than 100 4% 46 Source: National Association of Legal Assistants, 2004 National Utilization and Compensation Survey Report, Table 2.10, Number of Attorneys in Firm Supervised by Percent Respondents One or more attorneys 46% 611 Office administrator/manager 31% 409 Legal assistant manager 6% 75 Department head 6% 17 No supervision (or other) 6% 77 General counsel 4% 51 Management committee 2% 21 Source: National Association of Legal Assistants, 2004 National Utilization and Compensation Survey Report, Table 2.8, Overall Supervision of Support Staff Number of Attorneys Ratio of Attorneys to Legal Assistants More than Source: National Association of Legal Assistants, 2004 National Utilization and Compensation Survey Report, Table 2.11, Ratio of Attorneys to Legal Assistants

16 14 CHAPTER 1 Figure 1-9 Legal Assistant Compensation Survey By Years of Legal Experience Average Total Compensation Respondents 1 5 years $35, years $43, years $47, years $48, years $51, Over 25 years $51, All years $46,862 Source: National Association of Legal Assistants, 2004 National Utilization and Compensation Survey Report, Table 4.7, Annual Salary and Compensation by Total Years of Legal Experience By Region Average Total Compensation Respondents Far West $55, New England/East $51, Southwest $47, Southeast $45, Great Lakes $44, Plains States $42, Rocky Mountains $43, Source: National Association of Legal Assistants, 2004 National Utilization and Compensation Survey Report, Table 4.11, Annual Salary and Compensation by Region Average Total Compensation (Greater than 40% of By Practice Area time in practice area) Respondents Tax $61,379 9 Intellectual property $60, Securities/antitrust $55, Corporate $53, Employment/labor law $50, Contract $49, Environmental law $47, Civil litigation $46, Criminal $45, Probate $45, Real estate $45, Administrative/government/public $44, Bankruptcy $44, Personal injury $44, Insurance $43, Source: National Association of Legal Assistants, 2004 National Utilization and Compensation Survey Report, Table 4.14, Total Compensation by Specialty Area Greater than 40% of Time

17 The Legal Team, Law Practices, and Law Firm Governance 15 Number of Attorneys Average Total Compensation Respondents 1 $45, $45, $45, $45, $47, $48, $54, $44, $53, $49, $53, More than 100 $56, Figure 1-9 (Continued) Source: National Association of Legal Assistants, 2004 National Utilization and Compensation Survey Report, Table 4.13, Annual Salary and Compensation by Number of Attorneys Paralegals and legal assistants are projected to grow faster than the average for all occupations through Some employment growth stems from law firms and other employers with legal staffs increasing hiring paralegals to lower the cost and increase the availability and efficiency of legal services.... Despite projections of fast employment growth, competition for jobs should continue as many people seek to go into this profession; however, highly skilled, formally trained paralegals have excellent employment potential. Bureau of Labor Statistics, U.S. Dept. of Labor, Occupational Outlook Handbook, Edition. paid overtime if they fall into one of the four white-collar exemptions: executive, administrative, professional, or outside sales. If an employee is exempt, he or she is not required to be paid overtime wages. If an employee is non-exempt, he or she is required to be paid overtime wages. According to a recent survey of legal assistants, 52.2 percent of respondents indicated that they were classified as exempt by their employers and were not paid overtime wages. The issue of whether legal assistants should be exempt or nonexempt is hotly debated. The United States Department of Labor, which administers the FLSA, has long taken the position that legal assistants are nonexempt and are thus entitled to overtime pay for hours worked in excess of 40 per week because their duties do not involve the exercise of discretion and independent judgment required by the regulations (see Wage & Hour Opinion Letters [available at esa/whd/opinion/opinion.htm] dated March 20, 1998; February 19, 1998; April 13, 1995; February 10, 1978). As recently as 2005 (see Wage & Hour Opinion Letter exempt The employee is not required to be paid overtime wages over 40 hours per week. nonexempt The employee is required to be paid overtime wages (time and a half) over 40 hours per week.

18 16 CHAPTER 1 dated January 7, 2005, FLSA2005-9), the Department of Labor stated that a legal assistant was not exempt from the FLSA even if the legal assistant possessed a fouryear degree, had a paralegal certificate, had taken continuing legal education classes, and had been practicing as a legal assistant for 22 years. The Department relied on section (3)(7), which states that [p]aralegals and legal assistants generally do not qualify as exempt learned professionals because an advanced specialized academic degree is not a standard prerequisite for entry into the field. Although many paralegals possess general four-year advanced degrees, most specialized paralegal programs are two-year associate degree programs from a community college or equivalent institution. The advantage of this long-held position by the Department of Labor is that if a legal assistant is deemed non-exempt, then he or she is entitled to overtime pay, which can be an attractive benefit. Unfortunately, the ruling arguably diminishes the profession by holding that it is not of a prestigious enough nature to warrant exempt status. The Department of Labor s rulings have been widely criticized because they fail to take into account the recent practice and utilization of legal assistants, the recognized status of the profession, legal assistants advanced education and continuing legal education, the substantive duties they perform, and the degree to which legal assistants exercise discretion and independent judgment in the performance of the job. 8 In 1994, a jury in the case of Riech v. Page & Addison, P.C., (Case No CV-2655-P in the United States District Court, Northern District of Texas, Dallas Division) found that the legal assistants at the Page & Addison law firm were exempt from overtime requirements. Nevertheless, the Department of Labor did not change its general position on the matter. Interestingly, a rather large number of law firms still do not pay overtime compensation to legal assistants, even after the many rulings of the Department of Labor on the subject; according to Figure 1-10, only 38 percent of firms always pay overtime compensation for legal assistants. Paralegals being classified as exempt or nonexempt is a double-edged sword. Being nonexempt protects the paralegal from working associates on partner track hours (i.e., large numbers of hours), especially in a costminded firm (and what firm is not cost-minded nowadays?). However, paralegals are striving to be recognized as professionals and most professionals are exempt employees. Linda L. Rushton, CLA The Judicial System s Recognition of the Legal Assistant Profession The United States Supreme Court case of Missouri v. Jenkins, 491 U.S. 274, 109 S.Ct. 2463, 105 L.Ed. 2d 229 (1989), established that the legal assistant profession had come of age. In that case, the plaintiff was successful on several counts under a

19 The Legal Team, Law Practices, and Law Firm Governance 17 Do You Receive Overtime Compensation? Percent Respondents Always paid 38% 468 Sometimes paid 7% 85 Never paid 37% 467 Compensatory time off 19% 231 Figure 1-10 Legal Assistant Overtime Compensation Source: National Association of Legal Assistants, 2004 National Utilization and Compensation Survey Report, Table 2.4, Overtime Compensation federal statute in a civil rights lawsuit and was attempting to recover attorney s fees from the defendant. The federal statutory language allowed the prevailing party to recover reasonable attorney s fees from the adverse party. The plaintiff argued for the right to recover the time that both attorneys and legal assistants had spent working on the case. The defendant argued that legal assistant time was not attorney s fees. Alternatively, the defendant argued that if required to pay for legal assistant time, the amount should be about $15 an hour, a representation of the overhead costs to the firm of a legal assistant. The Court found that legal assistants carry out many useful tasks, and that reasonable attorney s fees refers to a reasonable fee for work produced, whether by attorneys or legal assistants, and could be compensable as long as the work was not of a clerical nature. The Court also found that under the federal statute, legal assistant time should be compensable at the prevailing market rates. The Court noted that the prevailing rate at that time for legal assistants in that part of the U.S. was about $40 an hour and held that the plaintiff was entitled to receive that amount for legal assistant hours expended on the case. This important case defined a legal assistant position not as a secretarial or clerical position but as a professional, fee-generating profession. Former Chief Justice Warren Burger stated that the expanded use of welltrained assistants, sometimes called paralegals, has been an important development. The advent of the paralegal enables law offices to perform high quality legal services at a lower cost. Possibly we have only scratched the surface of this development. While Missouri v. Jenkins was a landmark decision for legal assistants, the case involved a federal court interpreting a specific federal statute, the Civil Rights Act. Because fee questions occur in many different situations, it is possible for a court under a different statute to reach a different conclusion. Since Missouri v. Jenkins, many federal and state courts have allowed for recovery of legal assistant billable hours [see Baldwin v. Burton, 850 P.2d 1188, (Utah 1993), Cooper v. Secretary of Dept. of Health and Human Services, No V, 1992 WL at 3(Cl. Ct. March 11, 1992), Consolo v. George, 58 F.3d 791 (1st Cir. 1995), Department of Transp., State of Fla. v. Robbins & Robbins, Inc. 700 So. 2d 782, Fla. App. 5 Dist. (1997), Guinn v. Dotson (1994) 23 Cal. App. 4th 262, In re Mullins, 84 F.3d 459 (D.C. Cir. 1996), and Taylor v. Chubb Group of Insurance Companies, 874 P.2d 806 (Ok. 1994). Role Models American, Inc. v. Brownlee, 353 F.3d 962 (C.A.D.C., 2004)].

20 18 CHAPTER 1 The recognition by the courts that legal assistants are income-producing members of the professional legal service delivery team, that they perform substantive legal tasks under the supervision of the attorney, and that their fees are property included as a component in an award of attorney fees has done much to increase the status of the legal assistant profession. 9 Legal Assistant Profitability for Law Offices The use of legal assistants is a financially profitable proposition and represents a win-win situation for both the law office and client. Law offices charge clients for legal assistant time. Legal assistant billing rates are substantially more than the salaries law offices pay them, so law offices make a profit by billing legal assistant time. In addition, clients are typically very willing to pay for legal assistant time because the billable rate is substantially less than what an attorney would charge to do the same work. To remain competitive, lawyers need to acknowledge that they are overqualified for much of what they do....it is through the expanded use of legal assistants that lawyers can remain profitable while meeting current client demands. 10 office manager Manager who handles dayto-day operations of the law office, such as accounting, supervision of the clerical support staff, and assisting the managing partner. law clerk A law student working for a law firm on a part-time basis while he or she is finishing a law degree. Law clerk duties revolve almost exclusively around legal research and writing. Office Manager Office managers are typically found in smaller firms. They handle day-to-day operations of the law office, including such activities as timekeeping and billing, supervision of the clerical support staff, assisting the managing partner in preparing a budget, and making recommendations with regard to changes in systems and purchases. Office managers typically do not have degrees in business. They are usually not given as much decision-making power as administrators and, unlike administrators, usually assist a managing partner in managing the law office. Nonetheless, good office managers are important to the survival of smaller firms. Experienced legal assistants are sometimes promoted into office manager positions. Law Clerk A law clerk is usually a student who works for a law firm on a part-time basis while he or she is finishing a law degree. Law clerk duties revolve almost exclusively around legal research and writing. Law clerks perform research, write briefs and motions, and prepare memorandums of law.

21 The Legal Team, Law Practices, and Law Firm Governance 19 Law Librarian A law librarian conducts legal research using both computerized and manual methods; acquires and preserves library materials; is an expert in legal and nonlegal research methods/tools; advises attorneys and legal professionals on legal research methods; maintains, classifies, indexes, and stores library materials; manages the library/legal research budget and may coordinate the use of electronic resources, such as Westlaw, LexisNexis, and other services. Legal Secretaries Legal secretaries provide a variety of services to attorneys and legal assistants. Typical duties include preparing documents, composing routine correspondence, proofreading, reading and routing mail, scheduling appointments, organizing material, filing, answering the phone and screening calls, faxing, copying, responding to s, responding to clients, and other tasks. Figure 1-11 shows that about 60 percent of legal assistants have limited or full access to secretarial support. Secretaries include legal secretaries, receptionists, and word processing secretaries. Competent legal secretaries have highly specialized skills and perform many services for law firms. Legal secretaries, like legal assistants, have their own local, regional, state, and national associations. It is not uncommon for a person to start employment with a law office as a legal secretary and work his or her way up to legal assistant, office manager, or another position. Receptionists are commonly found in all law offices, and their duties include answering the phone, greeting clients, opening the mail, and making photocopies. Word processing secretaries are commonly found in larger law offices. They type, format, and produce documents using word processing software. It is not uncommon for friction to exist between legal assistants and secretaries. Problems may occur in law offices where there are no clear descriptions of job duties, where legal assistants are required to do some clerical or administrative work, and where secretaries perform higher-level research or case management from time to time. This blurring of the lines sometimes causes confusion about who is supposed to do what; when this happens, pressure is added to the working relationship. Some secretaries also resent legal assistants performing higher-level work than they themselves are allowed to perform. In addition, some secretaries refuse or resist performing clerical work for legal assistants because they view legal assistants law librarian A librarian is responsible for maintaining a law library, conducting legal research, and managing library resources. legal secretaries Employees who provide assistance and support to other law office staff by preparing documents, composing correspondence, scheduling appointments, and performing other tasks. Secretarial Assistance Percent Respondents Have personal secretary 4% 45 Share secretary with one or more attorneys 28% 365 Share secretary with one or more legal assistants 4% 57 Have limited access to a secretary 21% 269 (perform some of own secretarial duties) Have access to word processing staff or secretarial pool 6% 72 No secretarial service 39% 503 Figure 1-11 Secretarial Support Provided to Legal Assistants Source: National Association of Legal Assistants, 2004 National Utilization and Compensation Survey Report, Table 2.2, Kinds of Secretarial Assistance Provided