Unemployment in the United States continues to hover near record highs. All industries seem to be equally affected, including the legal profession. The media is filled with reports of layoffs of staff and attorneys alike — mostly at large law firms. Many question the future job prospects of young attorneys.
The outlook for legal hiring may not be as bleak as it initially appears. One reason for optimism is the increased hiring of attorneys by corporate legal departments.
Historically, corporations used in-house counsel for routine matters and outsourced specialized or complex legal work to outside counsel. This trend may be changing as many corporations seek to bring more legal work in house. The rapid increase in hourly billing rates by law firms coupled with financial pressures facing corporations resulting from the recent recession have caused many corporations to re-examine their third-party expenditures, including outside legal fees.
Bringing work in house often results in reduced legal expenditures. Further, by embedding attorneys within the business group they support, the business is likely to receive more knowledgeable legal advice and a quicker response than if the business relied on outside counsel.
The decision to in-source legal work makes sense, with hourly rates for outside counsel charging in the $300- to $800-an-hour range. Assuming an attorney bills 2,000 hours a year, an attorney billing $350 an hour will bill $700,000 a year. The same attorney would likely earn $100,000 to $150,000 a year in house, depending on the attorney’s geographic location. Thus a corporation could potentially save approximately $500,000 even after factoring in overhead costs.
Many companies have added to their in-house legal staff in practice areas that were once the purview of outside counsel, including compliance, employment and labor, mergers and acquisitions, ERISA and even litigation.
Given the specialization associated with these practice areas, only large corporations are likely to hire in these specialties, as most companies lack the volume of work to justify hiring full-time attorneys in these areas.
The large number of unemployed associates from large law firms, coupled with the desire of many members of Generation X to accept lower compensation in order for a family-friendly, lower-pressure lifestyle, has accelerated this trend. Associates and even partners that once commanded astronomical salaries are now willing to accept lower compensation in return for the perceived stability of corporate employment.
By bringing more legal work in house and attracting some of the brightest legal talent, companies are often able to reduce legal expenditures while increasing the quality and timeliness of the legal advice they receive.
It remains to be seen, however, whether this trend will continue when the economy improves.
Mr. Classen is deputy general counsel of Computer Sciences Corp. The views expressed herein are those of Mr. Classen and not those of Computer Sciences Corp.