Legal Ethics of Coemployment
An arrangement in which attorneys have a PEO as their coemployer
appears to raise ethical concerns regarding lawyer independence, client
confidentiality, and fee sharing with nonlawyers. Still, a PEO
arrangement raises fewer ethical concerns than temporary employment
arrangements because attorneys and staff in a PEO arrangement do not
move among different law firms.1 As in
temporary employment arrangements, ethical concerns can be addressed and
overcome by carefully structuring the PEO relationship.
The State Bar of Wisconsin Professional Ethics Committee approved a
particular arrangement between a law firm and a PEO and advised that a
PEO arrangement conforms to the Wisconsin Rules of Professional Conduct
for Attorneys, so long as the:
- PEO, its owners, shareholders, and/or its officers own no interest
in the law firm;
- PEO has no involvement in the professional activities of the law
firm;
- PEO's activities are limited to administering compensation and
providing benefits to staff and lawyers;
- PEO receives no information regarding the law firm's clients, legal
work, fees, disbursements, or activities; and
- fees paid to the PEO for services are not based on the amount of
legal fees earned by the law firm.2
These restrictions prevent the PEO arrangement from contravening
Supreme Court Rule 20:5.4 by assuring that there is no involvement
whatsoever by the PEO with the legal business of the law firm nor any
sharing of legal fees. Accordingly, there is no diminution of the law
firm's independent professional judgment or interference with its other
ethical duties, including its duty to supervise personnel and its duty
of confidentiality.
Endnotes
1The State Bar of Wisconsin
Professional Ethics Committee has adopted ABA Formal Opinion 88-356
(Dec. 16, 1988) authorizing the engagement of temporary lawyers through
a lawyer placement agency.
2Letter to Bruce McIlnay dated June 6,
1997 (File No. 946). The authors acknowledge and thank attorney Don S.
Peterson for his thorough research and analysis in structuring the
arrangement considered in this particular instance.
Wisconsin Lawyer
