Issues to consider before you decide to outsource legal services
The term ‘outsourcing’ is commonly used when a law firm retained to do work on behalf of a client engages a third party to carry out that work.
Developments in technology and rising costs have led to an increase in legal services outsourcing (LSO). The services that are typically outsourced include discovery, document review, research, and/or drafting court documents.
The switch to LSO may pose a number of risks for legal practices, such as confidentiality, conflict of interest, competence and insurance.
Client confidentiality is a major concern with outsourcing. Rule 9.1 of the Australian Solicitor’s Conduct Rules 2012 prohibit a solicitor from disclosing confidential information outside the solicitor’s law practice.
An unauthorised disclosure of confidential information may lead to disciplinary sanction, claims for breach of contract, and/or injunctive relief disqualifying the lawyer from continuing to act.
If confidential information may or will be disclosed to an outsourced service provider, solicitors should obtain informed consent from the client before engaging the service provider. You may wish to consider including a client authorisation clause in your costs agreement.
Conflicts of Interest
Outsource providers often provide services to a number of firms. The outsource provider should ensure that the work they do for one firm is segregated from the work they might be providing for another firm engaged in the same matter.
Competence and Supervision
LSO also raises concerns about the competence, professionalism and reputation of the company undertaking the outsourced work.
Lawyers should properly supervise all work carried out on their behalf. Solicitors who use outsource providers are responsible for supervising the legal services provided to the client and are ultimately liable for the product of the provider.
It is recommended that solicitors consult with their professional indemnity insurance provider to ensure any contractual undertaking is covered by their insurance policy.
Although more firms are engaging in LSO, it continues to be a controversial practice. Clients who are concerned about privacy, for example, may choose a firm with in-office paralegals over a firm with paralegals overseas. Nevertheless, proper disclosure must be made even if this results in the loss of some clients. If proper disclosure is not made to the client you may be in breach of your fiduciary duties and your client agreement may be void.
If you would like any advice on outsourcing or client agreements, please contact one of our expert cost assessors on 1800 267 846.