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Corporate legal departments refusing to pay for work by first-year associates

High costs of fresh-faced lawyers causing legal departments to find cost-effective alternatives

Corporate legal departments are beginning to take a hard line on costs these days, and one of the first places they’re cracking down is in paying for the high hourly costs of first- and second-year law firm associates.

While many associates have decent credentials coming into their new roles, in-house legal departments are chafing at the thought of continuing to compensate these baby-faced barristers for completing often menial tasks that could very well be completely far more cheaply if kept in-house or outsourced to contract attorneys.

Corporate legal departments don’t seem to have a problem with paying for quality service, but they recognize that there’s a significant disparity between the skills and experience brought by a seasoned attorney and those of a young lawyer just learning the ropes.

The Wall Street Journal today published an in-depth article on this topic, and noted that in a September survey of in-house legal departments, 20 percent of the 366 respondents noted that they’re refusing to pay for the work of associates in their first two years in at least some matters. Nearly 50 percent of companies with annual revenues from $25 million to $4 billion said they’ve put policies in place against this, and the number appears to be growing.

In lieu of paying top dollar to young law firm associates, one source told the Journal that he’s relying on contract lawyers when it comes to discovery matters.

"The savings with contract attorneys can be huge," David Nation, general counsel of software maker Bentley Systems Inc., told the Journal. "Instead of paying $200-$300 an hour, we were paying $60 or $70. And the quality has been uniformly outstanding."

Another GC told the Journal that he’s taking more moderate measures when dealing with his outside counsel when it comes to paying for routine tasks.

"I go through our bills line by line," Lawrence Keane, general counsel, National Shooting Sports Foundation, said. "If you know exactly what's going on, then you know exactly when you need to pick up the phone and put your foot down."

For more on the topic, read expanded coverage in the Wall Street Journal.

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