A step that many businesses put off as long as possible is hiring their first in-house lawyer. Most owners are naturally reluctant to incur a new (and likely large) expense that does not generate revenue, especially if they have regular outside counsel with whom they work. The right time is, of course, when the expected value added of an in-house lawyer exceeds their cost. But even if adding a full-time in-house lawyer is not yet justifiable, there is still a way for these growing businesses to benefit from the value add that a dedicated lawyer can bring. The solution for these businesses may be to engage a “part-time” or “outsourced” General Counsel. The cost for such an arrangement can often be significantly less than purchasing outside counsel services on a standard hourly basis, and there can be efficiency and other benefits as well.
So, how does an experienced and commercially savvy in-house attorney (or outsourced General Counsel) add value?
Here are three ways an outsourced General Counsel can add value for your company:
- Save Money/Reduce Outside Counsel Fees. Obviously, if an in-house lawyer can do the same work as hourly outside counsel and at (what is almost always) a lower price, the company will benefit. In addition, an in-house lawyer can likely act more quickly than hourly outside counsel and due to their familiarity with the business will often be more efficient by focusing on the issues that are most important to the business. However, for most businesses it will not make sense to do all legal work in house, as certain specialist work like litigation or intellectual property is episodic, may require detailed expertise, and will not be cost-effective to bring in-house.
- Project Management. There are often legal or compliance related projects (such as acquisitions, data privacy, compliance or development of an IP portfolio) that require the oversight of an experienced senior executive. In many growing businesses, this responsibility falls on the founder/CEO, CFO or another busy and overworked executive. Many find that the legal training that lawyers receive and their detail-oriented nature can make them well suited to execute on these projects, and especially to ensure that they are being done in a cost-effective manner. Additionally, it allows founders and other key executives to focus on tasks where they can add the most value to the business.
- Risk Management. An experienced in-house lawyer can help many businesses manage legal, compliance and business risk. While it may be hard to attach a dollar value to this role, forward thinking business leaders know that it’s important to manage risk in order to sleep well at night. This is especially the case for industries that are regulated, have a lot of intellectual property, or where complicated contractual arrangements are important (such as finance, real estate, construction, technology and certain service-oriented businesses).
Many businesses may feel that they are too small to realize these benefits, or maybe they are concerned about the risk of bringing on a new and expensive full-time employee. And for many businesses that instinct is right – a rule of thumb is that a business should consider hiring its first lawyer only if it is purchasing 1000+ hours of outside counsel time per year on routine corporate, employment and other regular matters (not including things like litigation or significant deal work).
However, in our experience, the services of a part-time or outsourced GC can make sense for many companies and provide some of the benefits of a full-time in-house counsel, even where the business is regularly incurring 100 hours of annual outside counsel time on routine matters. Most of these arrangements are based on an agreed fixed monthly fee that usually factor in a discount to typical hourly rates in exchange for the predictability of a known monthly retainer (the size of the discount will typically increase for larger assignments). The business and the outside GC can agree to prospectively adjust the fee at any time if expected work levels are more or less than what was assumed when the arrangement was established.
Types of work that would be suitable for a part-time or outsourced General Counsel arrangement include:
- The drafting, review and/or negotiation of:
- Employment agreements, restrictive covenant agreements and other employment related documents
- Non-disclosure agreements
- Commercial agreements between the company and its vendors, suppliers or customers
- Real estate leases
- Day-to-day employment law counseling and support, including general advice and review and maintenance of an existing employee handbook
- Review and maintenance of existing cybersecurity and data privacy policies
- General intellectual property advice and counseling
- General corporate and corporate governance support, including acting as Board Secretary, and attendance (when requested) at key management and Board meetings
- Advice on routine commercial disputes (prior to the initiation or defense of litigation)
- Coordination and supervision of legal services provided by other outside counsel
If you wonder whether this type of structure might work for you, feel free to reach out to us to discuss further. We can help you decide whether the kinds and volume of legal work you are incurring are ripe for an “outside” General Counsel arrangement and help you develop a plan for that work that makes sense for your business.
Contacts:
Scott Kislin; Of Counsel; (646) 680-9664 direct; (917) 696-5525 mobile; skislin@ndgallilaw.com
Nicole D. Galli; Managing Member; (215) 525-9583 direct (PHL); (646) 680-9661 direct (NYC); ndgalli@ndgallilaw.com
