October 19, 2011
More Corporate Legal Departments Just Saying "No:" Is billing newbie attorneys at paralegal rates the answer?
More than 20% of the 366 in-house legal departments that responded to a recent survey conducts by Association of Corporate Counsel for the WSJ reported that they are refusing to pay for work performed by first- or second-year assocates. The WSJ Law Blog's Joe Palazzolo reports that almost half of the companies said they put that policy in place during the past two years, and the trend appears to be growing.
Why pick up the tab to train newbie attorneys? Corporate counsels should know. First, they too were not-practice ready law school grads once. Most likely they also attended the post-graduate school known as BigLaw to acquire the training they needed before moving to a corporate law department.
ATL's Elie Mystal thinks the consequences will be that law firms will just assign the billable work to mid-level associates. In Clients Won’t Pay For What Law Schools Churn Out, he writes “It’s entirely possible that 20% of clients don’t understand that having a midlevel do work more suitable for a trained monkey is actually worse than having a first-year do it." I think corporate counsels are smarter than that.
Billing Law School Grads at Paralegal Rates. Perhaps law firms could recoup some of their newbie lawyers employment training costs if the firms billed them out at paralegal rates. Doubt paralegals would like that unless the first- and second-year associates were also compensated at paralegal rates. Now there's a thought. Based on working with paralegals, however, an experienced paralegal trumps recent law school grads (regardless of where that newbie attorney graduated) any every day.
While a cyclical (recession-based) overall reduction in demand for high-end legal services explains part of this transformation, I believe that a significant and still growing part of the change is structural, and results from the change in the staffing and pricing of legal process work reflected in the trends discussed above. What this means is that rates of hiring at larger law firms for highly compensated partnership-track associates are likely to remain much lower than they were in, say, 2007 for quite a long time. While this is producing some wrenching short-term dislocations in the entry-level job market that are both tragic and widespread, it is at least as important to consider the possible longer-term effects not only on clients and law firms, but on prospective and current law students, law graduates, and law schools.