What does the new ‘gig economy’ freelancer model mean for your firm? Why is this a management issue? Paul Bennett looks at some of the key challenges
From 25 November, the introduction of freelance solicitors will be a seismic change for established law firms.
The new model gives employees and partners an option which is easier to launch than a traditional law firm, and the opportunity to be totally flexible, free from the shackles of partnership. Solicitors will find the new model appealing from a work-life perspective, and can see ‘their’ clients wanting to follow them.
The option of becoming a freelance solicitor makes it cheaper, easier and more straightforward to set up and practise than ever before. There is no process which will take months to get a new firm authorised. If someone wants to become a freelancer, they simply buy insurance, notify the Solicitors Regulation Authority (SRA) and ensure they have a letter of engagement and terms of business which meet the notification requirements from the SRA’s perspective.
There are challenges for those wanting to set up in this way, the most important of which is the fact that freelancers cannot hold money in a client account. This also presents a challenge for any firm involved in transactions with freelancers: the firm will have to find new and different solutions, as funds cannot be ‘held to order’.
For freelancers, there are two other key challenges: the notification obligations are onerous because the insurance is different; and they are sole traders so have unlimited liability. This means that the terms of business and insurance must do their job effectively.
But what does this mean for law firms and their management teams? In other fields, the gig economy has led to competition in some areas and collaboration in others. The SRA rules restrict the opportunity for the latter.
I spent much of this summer preparing documents for lawyers planning to launch themselves as freelancers. In November and December, 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 you lost staff in this way? How would you cover the work? What is your recruitment process and is it quick enough? Do you have interim or locum practitioners you can call on? Are they available or are they suddenly going to become competitors using the freelance model?
If someone is going to compete with you, do you get them to work their notice, or put them on gardening leave and try to build rapport with the client?
This is an employment and business risk which firms need to face now, so they can react in a timely manner and protect their business.
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.
When a freelancer is on the other side of a matter
If your team is asked to make a payment to a third-party managed account (TPMA), do they know what one is and how it works?
If accepting an undertaking from a freelancer, you may wish to consider the limitations arising from the fact that they cannot hold client funds, so will not be able to offer an undertaking to make a payment, as they will not be in funds. The use of TMPAs means you may need to amend the wording of standard undertakings. As with any other solicitor, a freelancer’s undertaking is a binding commitment and thus enforceable, but you need to make sure the payment obligation reflects the TMPA, and this means that clients – theirs or yours – need to control those funds jointly with the freelancer.
Right now, you should be looking at the following:
- reviewing staff knowledge of the freelance model and the client funds restrictions
- reviewing undertakings routinely sought – what would be needed to make those work without a client account for the other solicitor
- ensuring your systems and processes are updated so that payments are not made to freelancers who are not entitled to hold those funds
- establishing a system to include checking the status of solicitors prior to making any payments to them.
Just as you can get instant coffee, filter coffee and barista-made coffee, the public will soon have a range of solicitors to choose from – from freelancers (instant) to more expensive and sophisticated options.
Your staff and partners will have that choice too, so manage them well and make sure your firm is a great place to work. It’s time for a coffee with those staff and partners who this new model might appeal to.