When people discuss virtual law firms, they are generally referring to two distinct concepts:
- a law firm where there is centralized branding, administration and management, but individual lawyers work from satellite offices, often from client work sites or home; or
- a law firm that exists online through a secure portal.
Virtual Firms: Centralized Administration and Contract Lawyers
In response to the global recession and a traditional business model under attack, many innovative law firms are emerging that employ lawyers who work largely at home, thereby saving on overhead and costing clients less in legal fees.
The traditional math used by large law firms is one-third of the revenue goes to salaries, one-third goes to overhead and one-third goes to profits. High associate salaries and the cost of prestigious offices have put pressure on billing rates, which often reach as high as $800 an hour. Clients are increasingly looking for rate and fee reductions, and many expect that mindset will continue into the economic recovery and beyond.
To reduce costs, law firms are cutting or freezing compensation, cancelling summer programs and laying off associates. Litigation departments are outsourcing document review and production, work that was formerly assigned to junior associates. In transactional practices, large numbers of associates have been let go as it is increasingly uneconomic to retain unproductive staff for when the economy rebounds.
In addition to the business pressures on law firm management, large numbers of lawyers are choosing to leave the traditional law firm model. A February 2007 cover story of California Lawyer magazine entitled, “We’re Outta Here: Why Women are Leaving Big Firms” noted the serious issue of high attrition rates from the legal profession:
“The past few years have witnessed the highest levels of associate attrition ever documented, with an average annual attrition rate for both sexes of 19 percent, as recently reported by the NALP Foundation for Law Career Research and Education. Within five years of entering a firm, more than three-quarters of associates leave. Female associates were nearly twice as likely as males to depart to pursue a better work/life balance.”
Firms like Virtual Law Partners, Axiom Global Inc. and Keystone Law, have seized on a business opportunity. For example, Virtual Law Partners is a virtual law firm consisting of experienced lawyers, most who have left big firms. According to its website, “We work primarily with in-house legal departments of large and mid-sized companies to provide general corporate, licensing, contract, IP protection, securities regulation, financing, real estate, employment, merger and acquisition and other legal services.”
The firm currently has over 40 lawyers, all of which are “partners” and work from home. Some of the benefits for clients include lower billing rates and more experienced lawyers. Client work is performed by senior lawyers and work typically assigned to junior associates is given to highly trained paralegals. The firm highlights that they don’t have an “up or out” promotional system, which enables lawyers to stay with the law firm, and their clients by extension, for a longer time.
The VLP website further notes that “our state-of-the-art technology platform allows us to operate virtually, eliminating expensive office space and minimizing personnel as well as other overhead expenses. We pass along the savings to our clients. VLP attorneys, with education and experience comparable or superior to attorneys at other top tier firms, practice law at more prudent rates. ”
Our firm Heritage Law is an example of a virtual law firm. Heritage Law is currently five lawyers and six support staff, practices in the areas of wills and estates, family law and mediation and has offices in West Vancouver and Vancouver, BC.
Heritage Law is paperless and utilizes practice management software to centrally manage billing, time tracking, matter information, contacts, appointments, documents and document assembly. All staff log into one remote, secure server over the Internet which is a repository for all firm data and software applications. We have a VOIP phone system which allows eleven staff in different locations to use the same phone line and system. We have a remote answering service which answers client calls during the business day if a staff member is out of the office and routes the message to the appropriate person to deal with. All staff have a computer, high speed Internet, a VOIP phone and a scanner at their home offices. The firm retains traditional offices for meeting with clients.
Other than the principal of the firm Nicole Garton-Jones, all lawyers and staff are on contract. The lawyers earn a percentage of billed time and flat fees. Paralegals are paid hourly by the firm and there are some administrative staff on salary. The firm is at full capacity, and the lawyers and staff determine the amount of their earnings by how much they choose to work.
In terms of schedule, each of the staff set general guidelines of the days and hours they are available to work so the firm can plan around accepting and allocating new client files. The overriding concept is that everyone is a professional whose goal it is to provide excellent client service. Provided that client work is completed in a timely and efficient manner and sufficient notice is given of absences and time off, lawyers and staff are welcome to structure their individual schedules as they see fit. Lawyers bear final responsibility for client files and supervise staff to ensure that clients are served well.
The autonomy and flexibility of the work environment suits our staff, who have a self directed and pro-active work style. The flexible work environment has enabled Heritage Law to have access to and hire highly skilled staff, to the benefit of both the firm and clients alike.
Virtual Firms: Practicing Law Over the Internet
The impact of the recession has not just been difficult for big law. Many smaller firms and solos have felt enormous pressure as spending on consumer legal services has shrunk significantly. In an effort to reduce costs, enhance flexibility and offer reduced fees, many smaller firms and solos have chosen to open web-based practices.
In this context, a virtual law office, also termed e-lawyering or online lawyering, is generally defined as a professional law practice that exists online through a secure portal and is accessible to the client and the lawyer anywhere the parties may access the internet. These firms provide lawyers and clients with the ability to securely discuss matters online, download and upload documents for review and handle other business transactions in a secure digital environment.
Companies such as DirectLaw and VLO Tech have sprung up to enable solo practitioners and small law firms to service consumers and compete technologically with larger firms by using web-enabled software and also automated document assembly that can be bundled with legal advice. Clients are charged a fixed fee, rather than billed by the hour, and purchase legal services online using a credit card.
Heritage Law’s firm web site is www.bcheritagelaw.com. In terms of e-lawyering, clients can currently fill out online questionnaires to open files and pay invoices online. Heritage Law has signed an agreement with DirectLaw, a company based out of Florida, to assist with the launch of a companion firm site, www.heritagelawonline.com.
Heritage Law Online will be a branch of Heritage Law where simple estate planning legal services will be provided to clients, at least partly via the web and phone. Pending regulatory approval from The Law Society of BC, clients will be able to potentially interact with the firm entirely online. The fees will be relatively low and the intended client profile will be the approximately 50% of British Columbians who will die without a will.
For Heritage Law, the combination of a firm culture predicated on balance and flexibility with innovative technological solutions to facilitate it has enabled Heritage Law to access top talent and retain it. In addition, other benefits of the technology have been our ability to efficiently handle a large volume of client files, provide excellent client service and generate a high quality work product. Last but not least, the lawyers and staff of Heritage Law are happy to be part of the firm.
There are many interesting and innovative developments in the practice of law today, including virtual law firms. These technologies and innovations offer benefits to law firm managers, lawyers and clients alike. For many of us, these opportunities have enabled us to recapture the sense of excitement that made us enter the legal profession in the first place.