Independent lawyer or inhouse employee?

We receive calls from practitioners who are planning on leaving employment in a law firm to opt for a more flexible arrangement where they work for themselves with just one ‘client’, sometimes effectively filling an ‘in house’ role or covering a maternity leave vacancy. They are not operating on a traditional law firm model and want to understand their obligations and ongoing responsibilities and their professional indemnity insurance cover.

The first question we ask is what is the structure of the legal service they are providing? Are they really an employee of the organisation they are proposing to do work for or are they acting on behalf of their law firm retained by an external client?

Being clear about the basis on which they are working for their ‘client’ is essential so they and their ‘client’ understand what is required and where the boundaries lie. While it might be convenient for them to work in the client’s office and use the client’s IT system, is that consistent with the basis of their engagement if acting on behalf of their independent law firm? Does it allow them to comply with all their legal obligations?

Establishing your status as an independent external lawyer as opposed to an inhouse employee lawyer can be complex and will depend on all the circumstances. If you intend to be working on behalf of an independent law firm you should ensure the following:

• you have a clear written agreement between your firm and the client about how you will work with them
• your work is documented on your firm’s letterhead, not the client’s letterhead
• you determine how and when the work is completed
• you exercise independent professional skill and judgement when conducting the work and are not just acting as directed
• you comply with all ethical obligations, including your primary duty to the court, regardless of the client’s directions
• you maintain records of all work conducted on business platforms and devices that you control and you are not reliant on the client giving you access to their technology to recover your records
• you comply with all regulatory obligations involving cost disclosure
• you provide your account to the client as a tax invoice and are responsible for business obligations such as GST, work cover premiums and superannuation
• your contact details, including email address and phone number, are independent from the client.

You can be an employee for one or more organisations and separately complete work in your legal firm for others, but you cannot be an employee and an independent service provider at the same time for the same organisation. The critical thing is to be clear about your role for each client. This will then help you to understand how to maintain appropriate records and processes for that role and comply with your legal obligations such as confidentiality, holding client files for the appropriate time frame and cost disclosure.

Being clear about your role will also make it clear whether you are covered by your firm’s professional indemnity insurance cover. The policy is issued to the firm, not to individual practitioners. Where the firm consists of a sole practitioner it is the work done by that sole practitioner in the firm’s legal practice that is covered by the insurance policy. It does not cover a practitioner working outside the firm as an employee of another organisation or at a community legal centre. Describing yourself as a contractor is not enough to ensure the work you are doing is covered by your legal firm’s insurance policy if it is clear from all the circumstances that you are effectively an employee of another organisation and not acting on behalf of your legal firm.