Structuring the virtual counsel relationship (3/3)

The final step to engaging virtual counsel services is structuring the relationship through the contract. This is the most important part as it will establish how you work together for the duration of the relationship. Structuring the virtual counsel services contract properly is critical to unlocking value and clients should resist the temptation of treating this like any other external lawyer retainer. Think outside the box!

Here are some questions clients should ask when structuring the virtual counsel relationship:

What is the lawyer’s role – virtual general counsel (VGC) or swing capacity?

Are you hiring this lawyer to be the primary legal counsel to your executives and employees inside your organization (VGC) or to provide additional skilled capacity on an ‘as needed’ basis to an existing group of in-house lawyers (swing capacity)?

Who will be the lawyer’s main contact inside the organization?

It’s critical to appoint a main point of contact inside the organization who’ll be responsible for account and relationship management.  This will be the person responsible for educating other executives and employees on changes to the service model (if required) and how the virtual counsel should be used, when they should be called, etc…

Will the lawyer have office access and a workspace or will they be fully virtual?

A fully virtual model is a noble ideal but in my experience, it doesn’t always work well.  Being virtual often leads to transacting only in writing, which can be time consuming (more expensive) and inefficient. It can also promote too much of an arm’s length relationship which can affect the efficiency of the virtual lawyer’s work and ability to readily answer questions given they won’t be very integrated into the day-to-day business.  It is strongly recommended that clients plan for regular phone calls and face-time with their virtual counsel.

Consider providing onsite office access and work space and having virtual counsel periodically work onsite. This will create relationships between virtual counsel and the staff they work with which will, in turn, promote a greater sense of trust and reliance on counsel.  That underlying relationship will pave the way for greater effectiveness between counsel and staff when counsel is working remotely.

If the lawyer is empowered to work with employees without involving the main contact, then a reporting mechanism between the lawyer and their main contact should be incorporated into the contract.

Will the lawyer have a set schedule?

Will the lawyer be committed to working only certain days of the week? Or at certain times of the day? The organization needs to evaluate whether a fixed schedule makes sense – whether onsite and/or for virtual services. Legal service requirements can be unpredictable, so the contract should provide both parties with flexibility to work outside a set schedule in time-sensitive circumstances.

Will the organization need to change how it works with its external lawyers?

Involving virtual counsel in external counsel management may or may not always be a good idea. An in-house lawyer, as a knowledgeable client of external lawyers, can ensure the organization derives greater value from external counsel by taking on some of the lower-level work and coordination efforts. They can also ensure the advice and services provided by external counsel are appropriate for the business. All of this helps minimize the cost of external counsel.

However, depending on how the billing structure between the virtual counsel and client is defined, having virtual counsel manage external counsel may result in a doubling of costs so your contract will need to address this.

Will the virtual counsel be assigned information and record-keeping responsibilities?

The lawyer should be required to maintain specific information management requirements to keep corporate records and memory in the organization.

Will the lawyer be integrated into the IT system?

Integration of virtual counsel in your IT system will promote integration of counsel into the business. This increases efficiency and ensures legal and corporate information is kept in the organization’s IT system. However, it will likely require equipping the lawyer with certain working tools.

The more the lawyer is integrated, the more you will need to consider employer-employee risks. If the lawyer is equipped and present at your offices most of the time with a commitment of exclusivity, this will increase those risks.

What is the billing arrangement?

What is appropriate in this area will depend on the objectives of the relationship. Various billing arrangements can be explored, including payment of a fixed amount each month in advance or in arrears, payment for fixed blocks of time, or on an as needed retainer.  Establishing a fixed monthly fee will normally mean assuming a fairly consistent utilization of the lawyer month-over-month. This is doable if you have a history of usage you can use to estimate how much time you’ll need per month. If you don’t, then it’s a good idea to keep this flexible in the first year.

Should there be performance targets and incentives?

If the lawyer is expected to achieve certain targets for the corporation (ie. reduction in overall legal fees), there may be justification for building in performance incentives.

Should there be service level standards?

A lawyer’s response time or ability to stay within budget should be tracked.

What are each party’s exclusivity obligations?

Will the client assign exclusivity to the lawyer as the VGC? Will the lawyer promise to maintain a certain level of capacity for the client and/or prioritize the client’s work?

There are normally higher costs and commitments associated with exclusivity, including longer termination periods or advanced notices of non-renewal of any contract.

What are each party’s termination rights?

This goes to the organization’s flexibility to dismiss the lawyer in the event of poor performance or if the expected value is not being delivered and the lawyer’s ability to end the relationship where, as an example, the lawyer decides to accept full-time employment elsewhere.

What transition is required upon expiration or termination of the contract?

Depending on how integrated the lawyer is with the organization’s business, it will be important to set out the transition activities, such as information transfer and return of property.

There is no single right way to structure a virtual counsel relationship. However, thinking beyond the traditional external lawyer retainer agreement, while demanding a bit more effort on the client’s part, is critical to unlocking the true value of virtual counsel.

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This post originally appeared on the RIZEN Business Lawyers Alliance blog. This is the third post in a series that gives an overview of virtual counsel and the benefits of using virtual counsel.