When Stuart Wright left Lerners LLP almost 10 years ago for Intact Insurance, he joined a team of six in-house lawyers handling claims in Ontario. Today, Intact — Canada’s biggest provider of home, auto and business insurance, with nearly $7 billion a year in premiums — has grown its in-house ranks to 55 lawyers in Ontario, plus roughly another 65 across the rest of the country. It still employs an army of external counsel, but plans to grow its already ample in-house department in the coming years.
Intact is just one of many companies bringing more legal work in-house. “Everybody just wants to decrease expenses and increase revenues,” says Wright. Intact has made two major acquisitions in the past few years, and efficiency is a goal for the expanded company.
Thanks to companies like Intact, the number of lawyers working in-house in Ontario has grown by more than 50 percent over the past decade, from roughly 3,000 in 2002 to 4,600 last year (see chart, p 29). And one-third of in-house departments have grown over the past year, according to the 2013 Canadian Bar Association (CBA) In-House Counsel Compensation and Career Survey Report. Another 34 percent believe they’ll be boosting their in-house staff over the next three years.
The implications for the legal profession are far-reaching. There’s increasingly less contract work for firms as more businesses take care of their legal needs themselves. Meanwhile, large in-house departments have the tools to demand more from their external counsel and are pushing them to be extra efficient — in some cases even asking them to do away with billable hours. Talent is also shifting: in-house work is offering lawyers an alternative to the 24/7 demands of life at a large firm, without sacrificing satisfying legal work.
Put the trend down to the lingering effects of 2008. “Companies had to look very closely at what they were paying on external legals. There was just no money,” says Peter Carayiannis, founder of Toronto-based Conduit Law, which provides corporate lawyers to work on site as embedded counsel. With partners at premier firms billing themselves out for as much as $950 an hour, and senior associates going for upwards of $600, it doesn’t take an accounting whiz to see that “insourcing” legal work can lead to big savings. “Companies are capping the fees themselves,” says Carayiannis. “So, we’re going to hire Suzy and pay her $170,000 a year, period — no more billable hours.”
With this, the nature of in-house work has changed, too. The long-held perception among those in private practice has been that in-house lawyers are little more than managers who spend the majority of their time hiring external counsel to do the real work. “Anyone who has that thought now is a dinosaur,” says Carayiannis. “Companies are actively hiring lawyers not for their managerial skills, but for their technical, legal proficiency.” In fact, according to the CBA study, just one-quarter of companies are now outsourcing more than half of their legal work.
At Intact, for instance, Wright’s team of 17 lawyers do the exact same work as the company’s external counsel. “We’re just as good and cheaper, and we try to take as many files as we can in-house,” he says.
A growing number of smaller organizations are catching on to the in-house trend. Medium-sized companies are finding that hiring a lawyer or two full-time is a cost-effective way to deal with a wide range of legal issues.
For example, the Toronto International Film Festival (TIFF), with just over 150 full-time employees, hired its first in-house lawyer last spring. Sarah Huggins, director of legal and business affairs, spent six-plus years as a corporate and commercial litigator at Torys LLP. As the sole lawyer on staff at TIFF, she handles contracts, issues around charitable corporate governance, intellectual property, marketing, insurance and some litigation.
As organizations large and small take a more hands-on approach to the law, there has been a ripple effect on firms, particularly on the money side. More companies are implementing billing software that is designed to monitor invoices from external firms and flag costs that seem inflated. “It forces external firms to look at how their team is doing things,” says Wright — Intact rolled out such tracking software last year. “We are pushing ourselves to be efficient, and we’re pushing our external firms to be efficient, too.”
The quest to cut costs is also prompting more companies — like Target, which set up a nine-lawyer in-house department when it came to Canada last year — to demand fixed-fee arrangements from external counsel. With some lawyers charging in six-minute increments, many organizations hesitate to pick up the phone for advice, knowing they’ll be charged hundreds of dollars — no matter how valuable the counsel they receive.
Carayiannis’s own roster of 12 lawyers all work on a fixed-fee basis and he thinks it leads to better work. “Clients start speaking more freely about projects, their dreams, their strategic initiatives and fears. And when lawyers can assimilate this into their legal advice, they’re able to give advice that’s tailored to that client’s needs.” He’d like to see the billable hour disappear. “Those of us practicing this model recognize that we’re standing against the current,” he says. “But more and more clients are standing with us, insisting that at least some work be billed in a different way.”
While the industry is shifting due to the rise of in-house departments, so have lawyers changed their perceptions of what it means to forge a successful career path. Moving in-house is no longer perceived as a step down. Except financially. While compensation depends on whether you’re at a large or small firm, a Canadian company or U.S. branch plant, it’s almost always a pay cut. Sixthyear associates at top firms can pull in, with bonus, up to $300,000 per year while in-house lawyers at the same level make about half that. At the partner level, the discrepancy gets even greater. “There are definitely payment differences between law firms and in-house,” says lawyer Adam Lepofsky, founder and president of the Toronto-based legal recruiting firm RainMaker Group.
But there are other perks. “To have a bit more balance and predictability, maybe you’re willing to take a bit less — in some cases, a lot less — money,” Lepofsky says. “It depends what you want.”
For Huggins, the pay cut (which was significant having moved from Torys to a non-profit) was worth it. She was on maternity leave with her first child when the TIFF posting went up. “I was looking for something that would give me the flexibility to spend more time at home,” says Huggins. “More importantly, being part of the creative industry really appealed to me. This was the first time I’d ever encountered an opportunity to meld my artistic side with my legal side.”
“There has never been a shortage of talented lawyers looking to go in-house,” says Lepofsky. “People don’t always want law firm life. When they see 57-year-olds still working late nights and weekends, they want a different lifestyle.” And with in-house work becoming more challenging and a greater corporate emphasis on that nebulous notion known as “work-life balance,” corporate jobs have become far more appealing to young lawyers like Huggins. “It’s not always about working less, but in a different way,” says Lepofsky. “You can manage your time a little better than when you’re always at the client’s beck and call.”
With a second baby on the way in January, that’s something Huggins appreciates. But that’s not the biggest perk of working in-house for TIFF (and it’s not the star-gazing come September, either). “It’s that your legal advice lives inside the business,” she says. “You really feel as though you can see the impact of your advice on a day-to-day basis.”
So while the rise of in-house jobs — and the curbing of growth in private practice — may raise some alarm, those observing the larger business landscape see the trend as good for industry and even better for lawyers. “The more people who realize in-house work is just as hard and just as fulfilling, that’s a good thing,” says Wright. “It’s all the work without the other pressures of private legal practice. It’s just the law.”
This story is part of our in-depth guide to in-house counsel. Click here to read the next section on what in-house lawyers are making compared to those in private practice.
Photo of Sarah Huggins by Chris Thomaidis; makeup by Mark Gonzales