Main Story
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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