Column: The Midwest Report – Employment Law in General Practice Firms and the Rise of the National Boutiques
I’ve spent a lot of time in the two decades recruiting employment lawyers. It’s an interesting area of practice and seems to present some unique challenges for general practice law firms. Representing corporations is what law firms like to do; but representing them when they’re being sued by people (instead of other corporations) can create some interesting dynamics.
These dynamics have given rise to the employment boutiques, and many of those stand-alone firms have joined national firms that focus exclusively (or predominately) on employment and labor law.
First, most of the individual discrimination cases don’t have particular high exposure, and for that reason it’s hard for firms to charge the kind of rates that are typical in large general practice firms. Insurance companies offering coverage to employers (EPLI) has increased the downward pressure on rates.
Second, this is an area of practice where practitioners can get a lot of work from their partners in other groups; and while yes, this is an advantage, the traditional model of not sharing origination credit on cross-developed work can put employment lawyers at a disadvantage in evaluating and rewarding success.
As a result of all this, a lot of attorneys formed boutiques in their local market; general practice firms could refer employment work and not worry about rates or whether the boutique would try to “poach” other work from their clients. They could also develop their own client relationships without upward rate pressure and develop alternative fee structures.
But as a small local firm, it was difficult to service a regional or national client’s overall needs, and that’s where the national boutique model came in. These include Littler Mendelson, Jackson Lewis, Ogletree Deakins, Fisher & Phillips and Ford & Harrison.
I remember a merger I was involved in during the summer of 2005 when a New Jersey boutique was looking to be acquired. They were representing a number of large national corporations who were paring down their list of approved outside counsel. These clients were telling them that they needed to either join a general practice firm (where they could market other services) or join a national boutique so they could offer similar services in other states. Their concern with merging with a GP firm was that their rates would be raised to the point where they would lose their clients, so they decided to become the New Jersey office of one of the National Employment Firms.
Origination credit is often a bane and boon to all private practice lawyers. Partners that brought in a client want to be rewarded when new work comes in from that client; but this policy deters partners from pursuing that work in favor of developing their own, new clients. But in a national boutique, partners will share that credit. Interestingly, many forward thinking GP firms have adopted this policy as well.
It makes sense, doesn’t it? After all, the easiest client to get work from is the one that already knows you, and incentivizing your partners to go after that work financially just makes sense.
I was involved in a merger 10 years ago where the local boutique represented a lot of automotive suppliers. These are national entities, and they were representing them locally for the most part. Within a year of the merger they had client files in dozens of other offices, making everyone more successful.
Now let me be clear; I’ve spoken to a lot of employment partners that are in a general practice firm and it’s the right place for them. They’re sending work to other practitioners, they’re taking a lot of high-stakes cases (class actions for example) or they have a practice that includes other types of litigation. There are also a lot of GP firms that understand the unique aspects of this practice and help their partners be successful. But every year the national boutiques are getting larger and taking market share.
Dan Scott is director of the Legal Practice Group at Angott Search Group in the greater Detroit area.
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