Freelance Solicitors and Law Firms: What should your firm be thinking about? The risks, opportunities and issues.
Freelance Solicitors – What is the risk to your firm?
Are Freelance Solicitors really new? Totally. From the 25th November 2019 the Solicitors Regulation Authority (SRA) have liberated the modes of practice for solicitors to include two new models of practice, Freelance Solicitors and Non-SRA Regulated Entities. These two models are distinct from each other and the rest of the solicitors market. In this article Legal Services and Regulatory Solicitor Paul Bennett of Bennett Briegal LLP explores the issues for law firms and potential freelance solicitors.
Freelance Solicitors already exist don’t they?
In a word, no. The SRA Regulated Freelance Solicitor is new because the solicitor engages directly with the client without law firm involvement.
Existing freelance professionals typically either work in-house so are covered by their employer’s insurance or are consultants to multiple firms who so not act for members of the public directly.
What are Freelance Solicitors?
They are under the SRA regime:
- Prohibited from trading through an LLP or Company;
- Must contract trade in their own name with clients;
- Cannot employ anyone else (subject to a limited exception for those who undertake only specified types of work);
- Cannot hold client funds or use a client account; and
- Must tell clients about their status and the limitations on the protections for clients.
It is a model that looks very similar to the existing direct access barrister model. The bar should be very concerned about the model because it will complete I suspect for preliminary advisory work. Around 25% of the total income at the bar now comes from direct access work with 75% then from the referral model using solicitors and other suitably qualified professionals.
Moving forward some practitioners will work almost exclusively on the direct access model and for others, it will be a smaller percentage. For solicitors who are advocates and those whose is non-transactional, the model may strongly appeal. Solicitors for whom this will work well typically have years of direct client experience and contacts.
The SRA guidance issued on the model in July 2019 outlines that freelance solicitors can join Chambers. My guess is many will do so – the support and complementary skills of colleagues will appeal as will the true independence of choosing to do work or not which arises in the Chambers model.
Will the SRA take months to approve a new Freelance Solicitor starting up?
No. It is a registration form, not an application process. So a Freelance Solicitor simply notifies the SRA and is then permitted to practice in this way.
There is no process which will take months to get a new firm authorised. If someone wants to become a Freelance Solicitor, they simply buy insurance, notify the SRA and ensure they have a letter of engagement and terms of business which meet the notification requirements from the SRA perspective. It is a simple model.
The option of becoming a Freelance Solicitor therefore makes it cheaper, easier and more straightforward to set up and practise alone than ever before. This is likely to impact on established firms as the barriers to competing with firms are being removed: a disaffected partner or employee can simply move on and go freelance potentially within days not in six months’ time as is currently the case for many new firms.
The retention challenge for firms
I spent time this summer preparing documents for Freelance Solicitors. Over the next year or two I am expecting to see solicitors moving away from firms suddenly, especially parents of young children and older practitioners reducing their workload.
How would your firm cope if it lost staff in this way? If someone is going to compete with you, do you get them to work their notice or put them on gardening leave and try and build a rapport with the client?
One thing to think about now is flexible working. Do you have a culture of flexible working? If so, does it really work for your team? Check-in with key personnel now, before they can simply go freelance.
Is this model a good thing for law firms?
The aim is to compete with established law firms and create completion to enhance the options for what the SRA calls “consumers” and professionals call clients. The aim is to create different pricing options and service offerings.
If you have ever visited a coffee shop you will recognise the range of options can be confusing, but coffee is coffee. The SRA’s belief is that Freelance Solicitors, are solicitors. My coffee? No milk, no sugar but delicately hand-roasted please so this is a world away from instant coffee the SRA is aiming to create as a cheaper alternative to law firms.
Law firms, therefore, will face more completion and face staff and partners who may leave to set up in competition with them.
Law firms should consider how:
- Staff may perceive the Freelance Solicitor opportunity as a chance to develop their own business and to enjoy more freedom;
- How this liberation of regulation may adversely impact on recruitment and retention of staff;
- How the law firm will retain its client base in the face of a new model of practice with lower overheads (and client protections); and
- How they explain the status to clients when a Freelance Solicitor is on the other side to a transaction or piece of litigation.
Your team will wish to assess the risks of dealing with Freelance Solicitors. This means giving training and guidance to your staff about Freelance Solicitors and how they are permitted to work. For example, they are not able to accept client money during the course of a transaction and they may be asked to place funds through a Third-Party Managed Account (TPMA).
Freelance Solicitors are fully qualified Solicitors who are regulated and authorised by the SRA. They are bound by the same SRA Standards and Regulations 2019 as law firms in terms of the SRA Principles 2019 and compliance with the Individual Code for Solicitors. Law firms will have to explain to their clients the limitations of a Freelance Solicitor in a transaction this would be linked to different rules around funds (only through using a TPMA), and their distinct insurance position in comparison with law firms, given that it could have implications which may impact on them.
The changes mean that law firms should be training staff and partners as to the meaning of a Freelance Solicitor and the rules surrounding that mode of practice. This will ensure that funds are not paid to parties who are not entitled to them, which could give rise to a claim of negligence against you in the event of your client’s funds being lost.
Shall we hire some Freelance Solicitors to reduce the employment costs?
As set out above the SRA definition of Freelance Solicitors are obligated to contract with the client direct so firms can not simply hire them Uber driver style and take advantage of the changes. Firms can, of course, hire consultants as they always have been able to do but this comes with challenges including supervision and finding the right parties to be consultants.
Like any other change to the regulated marketplace, there will be winners and losers. My experience of advising in this area already goes back nearly two years so the evolution will be over time – it is a significant decision to become a Freelance Solicitor because of the long-term commitment to retaining insurance.
Law firms will adapt but some will find the competition painful when it focuses on price.
Paul Bennett is a Partner a Bennett Briegal LLP a specialist law firm advising other lawyers and law firms www.bennettbriegal.co.uk His book How to be a freelance solicitor is out now: http://www.lawbriefpublishing.com/product/howtobeafreelancesolicitor/