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    Wisconsin Lawyer
    September 01, 1999

    Wisconsin Lawyer September 1999: Legal Ethics of Coemployment

    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.


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