Monday, April 19, 2010

The Trend of Virtual Law Firms and Alternative Fee Arrangements

Solos and small firms are continually looking at ways to bring more value to their clients.  As you know, I have recently developed The Out-House General Counsel Membership Plan.  Many firms in the United States are going "virtual."  One of the leaders in virtual law firms is Bespoke Law out of Australia and England.  Jeremy Szwider is the Director of Bespoke Law and he wrote this piece about Virtual Law Firms and Alternative Fee Arrangements.

The recent downturn in our economy has presented new challenges to lawyers, and sparked a need for change in the legal marketplace. In our constantly evolving world, golden opportunities can present themselves and some professionals are facing the challenges head on.

One such example is Bespoke Law, the brainchild of Jeremy Szwider, which is a virtual law firm combining the principles of an in-house lawyer with a private practice model and has been described in the press as the “new third tier of the legal profession.”

1.       Time for change in the legal profession

Whilst business practices continue to develop to keep up with technology and the economy in general, the traditional private practice law firm remains steeped in old-fashioned ways. The economic boom during the past decade encouraged complacency in traditional firms as there was a high demand for legal services to support the constant flow of business transactions. However, the market has changed significantly in the past two years, and certain legal business models have cleverly adapted to such change in business needs.

The time is ripe for the legal profession to dramatically evolve by offering quality services in a much more cost effective and efficient manner. By considering lessons learnt from the commercial world and extracting the best concepts from both in-house legal departments and private practice, we have come up with an ideal hybrid solution. Bespoke Law recognises that business clients want quality legal services at value for money.

2.       A virtual law firm

A virtual law firm is a law practice providing professional legal services with the aid of a virtual environment and associated technology. Also known as “Law Firm 2.0”, virtual law firms have come to be associated with lower overheads than traditional law firms and are commonly serviced by experienced lawyers previously employed by large law firms. It is a relatively new concept in the legal world but has spread globally finding favour with clients seeking better service and value.

A virtual law firm does not require a formal office and offers clients easy access to cost effective legal services at the click of a finger.

Virtual law firms of 2010 have translated e-commerce principles into the legal domain by using the latest technology and online tools. With the luxuries of technology and online applications, virtual law firms can take the next step and foster communication channels with clients that are superior to the traditional law firm offerings. In addition to emails and mobile devices, clients can communicate with their lawyers via skype and instant messenger, and the boardroom concept is easily re-created with a mouse click. This is a much more cost effective and efficient process, and by not watching the clock, lawyers become even more approachable.

3.       Reduced overheads

Against this backdrop of efficiency is the concept that virtual law firms remove unnecessary overheads. Traditional law firms tend to decorate their high rise (or high rental) offices with fancy boardrooms, artwork and branded stationery. Clients are now demanding more cost effective legal services and virtual law firms are meeting such demands by removing overheads and administrative infrastructure leading to lower costs for clients.

Virtual lawyers have significantly reduced overheads by working from non-traditional offices. As such, virtual lawyers can charge substantially less for the same services provided by traditional law firms. With devices such as blackberries, iphones and laptops, virtual lawyers no longer need the permanency, or cost, of a formal office environment.

4.       Alternative fee arrangements

Alternative fee arrangements offer direct financial advantages to clients, and for virtual law firms, this is further facilitated by saving overheads. Under this financial model, a virtual law firm can rival its competitors with up to 30%-60% cost savings in fees.

Progressive legal businesses, including virtual law firms, are increasingly providing flexible fee arrangements. Lawyers considering adopting this model may consider a variety of value-based pricing models, such as retainers, capped fees, fixed prices, value pricing, staged costing and abort fees – all proffering more budgetary certainty and control over client’s legal spend.

In the economic downturn, clients are increasingly looking to outsource legal work offshore to obtain better value for money. The fact that virtual firms offer a cheaper pricing regime is in response to market demands and clients seeking this value proposition.

5.       A final word

There has most certainly been a shift in the pillars of the legal profession and traditional law firms are being challenged. With the economic downturn and the progress of technology, we are witnessing a revolution in the legal marketplace. Progressive virtual law firms, such as Bespoke Law, are evidence of this evolution and the creation of this new hybrid model of a law firm. The distinction between private practice and in-house is becoming increasingly blurred as more entrepreneurial lawyers set up practices incorporating the best aspects of both worlds. Virtual law firms are more than just a passing trend. They are part of the next wave of law firms, where legal services are not confined to an office space and virtually anything is possible. 

For more information about Bespoke Law contact Jeremy Szwider or check out their website at Bespokelaw.

Can a California Company have Unpaid Interns?

(The following is from a WSGR client alert.)

On April 7, 2010, the California Division of Labor Standards Enforcement (DLSE) issued an opinion letter addressing the requirements employers must meet in order to have unpaid interns in compliance with California law. Although widely published news reports, including a recent New York Times article analyzing the DLSE’s April 7th opinion letter, have raised hopes that California is relaxing its position with respect to the permissibility of unpaid internships, such optimism appears to be misplaced and employers must continue to exercise caution in this area.

The DLSE’s guidance is timely, as thousands of college graduates and students prepare to hit the job market in search of employment opportunities. Many employers offer internships for a variety of reasons, including providing useful “real world” experience to students seeking to learn more about a particular industry or profession, and trying to help the children of customers, business colleagues, or friends. However altruistic their reasons, employers must be aware that California and federal law severely limit the circumstances under which such internships can be unpaid.

In response to a letter from an attorney representing Year Up, Inc., (a program aimed at developing fundamental job and technical skills in information technology for 18- to 24-year-olds) about the classification of internships in California, the DLSE concluded that the interns enrolled in the internship program were not employees under California law, and therefore were exempt from coverage under California’s minimum wage law. In reaching its conclusion, the DLSE followed the federal Department of Labor’s (DOL’s) criteria for determining whether the interns were exempt from minimum wage coverage and examined the “totality of the circumstances” surrounding their activities. Ultimately, the DLSE’s opinion letter reiterated its longstanding position that California follows the same stringent federal factors in analyzing the classification of interns, and thus serves as a reminder to employers that improper classification of employees as unpaid interns can be costly.

The DOL has articulated six criteria to determine whether an “intern” or “trainee” is exempt from the Fair Labor Standard Act’s minimum wage coverage. In order to qualify as an unpaid internship, all six factors must be satisfied under state and federal law. The six criteria are as follows:

1. The training, even though it includes actual operation of the employer’s facilities, is similar to that which would be given in a vocational school.
2. The training is for the benefit of the trainees or students.
3. The trainees or students do not displace regular employees, but work under their close observation.
4. The employer derives no immediate advantage from the activities of the trainees or students, and, on occasion, the employer’s operations actually may be impeded.
5. The trainees or students are not necessarily entitled to a job at the conclusion of the training period.
6. The employer and the trainees or students understand that the latter are not entitled to wages for the time spent in training.

The DLSE’s new opinion letter concluded that all six criteria also must be satisfied in California. However, the agency now appears to take a more relaxed approach as to when an employer will meet certain aspects of the six factors. For example, in determining whether regular employees are displaced (i.e., the “non-displacement” criterion), the DLSE now takes the position that occasional or incidental work by an intern should not defeat the exemption provided such work does not intrude into activities that could be performed by regular workers and effectively displace them. As the stringent six criteria must still be satisfied, it will be difficult for companies, particularly for-profit companies, to have properly classified unpaid interns. The recent New York Times article regarding internships quoted Nancy J. Leppink, the acting director of the federal Labor Department’s Wage and Hour Division, as stating, “There aren’t going to be many circumstances [where for-profit companies can have unpaid internships and] still be in compliance with the law.”

Many companies have relied upon unpaid interns as a way to minimize costs and provide opportunities to eager workers who are willing to work for free in hopes of ultimately securing a paid position. Such an approach is risky, and employers must understand that the consequences of utilizing unpaid internships that do not comply with applicable law are potentially grave. As with misclassification of an employee as an independent contractor, employers with misclassified unpaid interns face potential liability for unpaid wages and violations relating to failure to pay minimum wage, which could be significant for a full-time intern. In addition to the wages due to unpaid interns, the employer could face potential liability for overtime and missed meal or rest periods. Moreover, the employer could be liable for various penalties under California’s Labor Code (including waiting-time penalties for failing to pay wages on a timely basis), as well as unpaid employment-related taxes owed to governmental agencies.

I work with several experienced employment lawyers who are on top of this issue.  If you have any questions about using interns in your business, please contact Daniel J. Alexander II at The Out-House General Counsel or (951) 737-4040 ext. 2.

Tuesday, April 13, 2010

Out-House General Counsel Membership Program

In today’s economic times, business owners can ill-afford to incur unanticipated risks or see a badly structured transaction or contract erode hard-earned company profits. That is one of the many reasons why a business owner’s team should include an experienced Business Attorney (“General Counsel.”) The mission of the General Counsel is to facilitate the achievement of the company’s business goals and profitability by being a proactive, valued member of the company’s management team. If the company is not in a financial position to take on an "in-house" General Counsel, it should consider retaining an "out-house” one.

A General Counsel, whether "in-house" or "out-house" tends to be far more knowledgeable about the company's industry, business operations, strategy and new product opportunities than typical outside law firm attorneys who are not accustomed to being on site or serve as hands-on members of the business unit. While an "in-house" General Counsel is ideal, my approach to the duties as an "out-house" General Counsel is the same. I approach the "out-house" General Counsel function with the goal of providing business clients with critical corporate legal services replicating, as much as possible, the methods, approach, and style of an in-house law department. As a result, I am keenly attuned to the full range of legal and business issues embedded in the company, understand the business priorities, and can add critical value by proactively translating legal risk into business reality. As an inside legal expert, I have the ability to devise action plans, engage in timely and decisive risk prevention strategies as well as to cost-effectively and creatively find solutions to your business’s own unique legal problems.

As your business’s "out-house" General Counsel I emphasize the importance of developing a working environment where I am integrated in your business and am a member of the management team. When business people perceive that an "out-house" General Counsel can provide creative legal solutions with a business perspective, they are drawn more deeply into business teams as high value-added contributors as well as trusted advisors. A wise business owner is one who recognizes the business advantages and risk reduction that an "out-house" General Counsel can bring, and ensures that his or her executive management team always includes this valuable team member.

As your Out-House General Counsel, my goal is to add value to the dollars your company spends on its legal needs. I also do not want you to be surprised at the end of the month by unexpected high legal bills. One of the biggest complaints I hear from clients is “I don’t believe you charged me $29.50 for a quick phone call.” Most lawyers charge by the tenth of the hour for whatever they do. Since lawyers are providing a service, we routinely charge for our time. This creates a “conflict” because it is the client’s best interest for the lawyer to spend less time on legal matters and it is in the lawyer’s best interest to spend more time (without necessarily being concerned with the ultimate outcome.) I want to move away from this hourly business model and the focus on time. Accordingly, I have created a membership based business model that focuses on building a relationship and bringing real value to the client.

No matter what your current legal budget or needs are, I have a plan that will fit your business’s needs. There are five plans ranging from a few hundred dollars per month to a few thousand dollars per month. If you are not prepared to commit to one of the plans, I still offer my services on a flat fee and hourly basis.  We can also build a custom plan for your particular needs.

If you have any questions or concerns about any of the above or just want to learn more, please contact Daniel J. Alexander II at (951) 737-4040 ext. 2 or at Out-House General Counsel.

Monday, April 5, 2010


Sometimes a small business fails and is forced into small business bankruptcy. If you are a small business owner contemplating bankruptcy, you should seek the assistance of a bankruptcy attorney to advise you. Business bankruptcies are described as liquidation and reorganization of business and funds.

Small business can be categorized in the following ways and they can file under three kinds of bankruptcies specified by federal law. First, we need to understand the business forms that exist for small businesses.  Sole proprietorships are legal extensions of the owner, and it is the owner who is responsible for the assets and liabilities of the firm. This kind of business can take bankruptcy protection under chapters 7, 11 and 13. Corporations and partnerships are separate legal entities and they can file for bankruptcy under chapters 7 or 11.
It is important to understand the different chapters specified by the United States bankruptcy law declaring small business bankruptcy. 
Chapter 7
When the owners and partners of a firm feel that the company does not have substantial assets to repay the debts, only then is small business bankruptcy filed under Chapter 7. In other words the business is over and no restructuring is possible. Trustees are appointed by the bankruptcy court and asked to take possession of the assets like offices, warehouses, stock etc and these assets are distributed among the creditors.
Chapter 11
This chapter can be of use to those small businesses which have future. The companies which file for Chapter 11 small business bankruptcy make a plan for reorganization, to deal with creditors and repayment of debt. If the plan is approved by the creditors and court, the company can restructure itself and repay creditors in installments over a specified period.
Chapter 13
Only sole proprietorship companies can file for bankruptcy under chapter 13. When the owner files for chapter 13 small business bankruptcy, he or she will have to submit a plan for repayment to the court. The amount of repayment is dependent on the debt and the kinds of assets the owner possesses.  One can save his or her personal assets like house under this section.
It is important to consult you business attorney and a bankruptcy attorney when contemplating filing for bankruptcy.  If this is something that you are contemplating for your business, I have several very good bankruptcy attorneys that I can refer you to.  Please do not hesitate to contact me at (951) 737-4040 ext. 2 or The Out-House General Counsel.