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                                        124 N.J.L.J. 926
                                        October 12, 1989


Appointed by the Supreme Court of New Jersey


Attorney Leasing - Law Firm Leasing
Attorney Associates and Secretarial
Staff From an Employee Leasing Firm

    The inquirer, a sole practitioner with one associate and two secretaries, is contemplating leasing these three employees from an employee leasing firm. According to the inquirer, employee leasing by his firm would be accomplished in the following manner:
        [The] law firm would terminate its own employees and the same employees would then be hired by the employee leasing company and leased back to the law firm. The em ployees continue to perform their normal duties on behalf of the law firm without interruption. The leasing company pays all salaries, employment taxes, withholding, etc. Because the employee leasing company can combine the employees of many clients, more favorable insurance, retirement and other benefits can be provided. The law firm pays the employee leasing company an amount equivalent to wages, taxes and benefit costs together with an administrative fee to the leasing company based on the amount of payroll.
        The amount of compensation to the employees would continue to be determined solely by the law firm and the leasing company, which is operated by non-lawyers, would have no contact, control or involvement with the legal business of the law firm.

The inquirer asks whether such an arrangement would constitute the division of legal fees with a non-lawyer in contravention of RPC 5.4.
RPC 5.4, which is entitled "Professional Independence of a Lawyer," prohibits attorneys from sharing legal fees with non-lawyers. RPC 5.4 is based upon ABA Model Rule 5.4. As discussed in ABA Formal Opinion 87-355, there are two principal reasons for the fee sharing prohibition embodied in Model Rule 5.4:
        First, to avoid the possibility of a non-lawyer being able to interfere with the exercise of a lawyer's independent professional judgment in representing a client; and second, to insure that the total fee paid by a client is not unreasonably high. [Excerpted from ABA Formal Opinion 87-355, copyright by the American Bar Association. All rights reserved. Reprinted with permission].

    We are of the opinion that the leasing arrangement described by the inquirer does not violate RPC 5.4. The proposed leasing arrangement would not adversely affect the manner in which clients of the law firm are represented since the employee leasing company would have no control or supervision over the leased attorney's exercise of independent professional judgment or over how the law firm uses the attorney. Rather, the law firm would continue to be completely responsible for the performance of the leased attorney.
    The fee to be paid by the law firm to the employee leasing company includes an amount corresponding to its employee's compensation and fringe benefits plus a certain percentage of payroll costs payable to the employee leasing company for services rendered. The compensation to be paid to leased employees would be determined by the law firm, not by the leasing company. The amount paid to the employee leasing company would not be tied to either specific legal fees or gross fees received by the law firm. In short, there would be no direct relationship between particular legal fees received by the law firm and the amount the law firm pays to the employee leasing company. As to the extent that fees paid to the employee leasing company can be traced back to legal fees received by the firm, such a connection is too remote to pose
ethical problems. See Florida Bar Assoc. Staff Opinion TEO88015.
    For the foregoing reasons, we are of the opinion that under RPC 5.4 it would be permissible for the inquirer to enter into an agreement with an employee leasing firm under the arrangement he has described.See footnote 1 1
    As with all advisory opinions, we have dealt solely with the ethical considerations, and have not addressed any substantive or regulatory considerations which may exist.

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Footnote: 1 1For further discussion of this subject, refer to Opinion 632 adopted contemporaneously by the Committee.

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