Careers

Diversity, Equity & Inclusion

Experience

Innovation

Interactive Maps

Locations

About

Pages

Meet our team of innovators
Ask us how we do it

Professionals

Insights

Services

Thompson Hine LLP, a full-service business law firm with approximately 400 lawyers in 11 offices, was ranked number 1 in the category “Most innovative North American law firms: New working models” by The Financial Times and was 1 of 7 firms shortlisted for The American Lawyer’s inaugural Legal Services Innovation Award. The firm has been recognized by the National Law Journal as a Legal Technology Trailblazer and featured by Bloomberg for its innovative service delivery models, which drive accuracy and predictability. The firm’s commitment to innovation is embodied in Thompson Hine SmartPaTHTM – a smarter way to work – predictable, efficient and aligned with client goals. For more information, please visit ThompsonHine.com and ThompsonHine.com/SmartPaTH.

Home | Thompson Hine LLP

Atlanta

Chicago

Cincinnati

Cleveland

Columbus

Dayton

Los Angeles

Minneapolis

New York

Silicon Valley

Washington, D.C.

<img style="max-width: 100%;height: auto;max-width: 100%;height: auto" loading="lazy" class="alignright size-medium wp-image-1631" src="https://www.thelawforlawyerstoday.com/wp-content/uploads/sites/754/2015/04/employees-222x300.jpg" alt="employees" width="222" height="300">Some law firms or solos searching for efficiency and ways to trim overhead have considered arrangements with a &ldquo;professional employer organization,&rdquo; or PEO. &nbsp;A PEO, which some states permit by statute, is a separate company to which an organization allocates some or all of its human resources functions. &nbsp;The PEO sometimes acts as a co-employer of the organization&rsquo;s employees.
PEO&rsquo;s typically offer a range of HR functions, including payroll, attendance and time-keeping, employment taxes, health and life insurance benefits, retirement plans and workers&rsquo; compensation claims.
PEO ethics issues for lawyers
PEO&rsquo;s were not constituted with the professional responsibilities of lawyers in mind, and they raise some significant ethics issues that lawyers must consider before deciding to enter into an arrangement with a PEO.
Ethics committees in several jurisdictions have weighed in with guidance, including the Association of the Bar of the City of New York, which issued its <a href="http://www.nycbar.org/ethics/ethics-opinions-local/2015opinions/2117-formal-opinion-2015-1-ethical-guidance-for-law-firms-considering-the-use-of-a-professional-employer-organization">opinion </a>earlier this month.
The ABCNY pointed to New York&rsquo;s&nbsp;<a href="http://codes.lp.findlaw.com/nycode/LAB/31">PEO Act</a>,&nbsp;defining the PEO as a business that enters into a written contract with a client organization to &ldquo;co-employ all or a majority of the employees&rdquo; of the organization and to share in the right to direct and control employees.
The ABCNY identified several ethics issues for law firms or solos who might find a PEO to be attractive:
<ul>
<li>Duty to exercise independent judgment &mdash; several New York Rules of Professional Conduct require that lawyers exercise independent judgment on behalf of their clients, and prohibit any interference by third parties, including non-lawyers. &nbsp;See <a href="http://www.nycourts.gov/rules/jointappellate/ny-rules-prof-conduct-1200.pdf">NYRPC</a> 1.8(f), 5.4(c), 5.4(d)(3). &nbsp;At a minimum, the PEO must not have the authority to hire, terminate, discipline or otherwise control employees in connection with any aspect of the practice of law.</li>
<li>Duty of confidentiality &mdash; to comply with NYRPC 1.6, arrangements with a PEO must include reasonable safeguards to prevent confidential information from being shared with the PEO or accessed by the PEO.</li>
<li>Duty to avoid conflicts &mdash; PEO&rsquo;s provide services to many different organizations simultaneously, and given this business model, they might service law firms with clients adverse to each other. &nbsp;The ABCNY concluded that this did not present any conflict problem, as long as the PEO did not access client confidential information.</li>
<li>Prohibition against sharing fees with non-lawyers &mdash; any payment arrangement with a PEO must be structured so that it does not constitute fee-sharing, as barred by NYRPC 5.4(a). &nbsp;Most PEO&rsquo;s charge a fee based on a percentage of total payroll, although other arrangements also exist, such as flat fees or fees per employee. &nbsp;As long as the PEO&rsquo;s compensation is not based on the fees paid by the law firm&rsquo;s clients, it does not violate the prohibition against fee-sharing.</li>
</ul>
Other state ethics opinions on PEO&rsquo;s
Several other state ethics opinions point to similar concerns and ethical constraints. &nbsp;See&nbsp;<a href="http://filehost.thompsonhine.com/uploads/OSBA_Inf._Ethics_Op._2011-02_fe43.pdf">Ohio St. Bar Ass&rsquo;n Legal Ethics &amp; Prof&rsquo;l Cond. Comm. Inf. Adv. Op. 2011-02</a> (Dec. 2, 2011); <a href="http://www.dcbar.org/bar-resources/legal-ethics/opinions/opinion304.cfm">D.C. Bar Ass&rsquo;n Ethics Comm. Op. 304 </a>( Feb. 20, 2011); <a href="http://filehost.thompsonhine.com/uploads/Connecticut_Ethics_Op._02-08_c3f5.pdf">Conn. Bar Ass&rsquo;n Comm. on Prof&rsquo;l Ethics Op. 02-08</a> (June 24, 2002);<a href="https://www.nhbar.org/legal-links/Ethics-Opinion-1989-90_9.asp"> N.H. Bar Ass&rsquo;n Ethics Comm. Formal Op. 1989-90/9</a> (July 25, 1990); Colo. Bar Ass&rsquo;n Ethics Comm. Abs. 2007-9 (2007);<a href="https://www.ncbar.gov/for-lawyers/ethics/adopted-opinions/2003-formal-ethics-opinion-6/"> N.C. State Bar Ass&rsquo;n Ethics Comm. Formal Op. 6 (July 25, 2003)</a>; <a href="https://www.law.uh.edu/libraries/ethics/opinions/501-600/EO560.pdf">Tex. St. Ct. Prof&rsquo;l Ethics Comm. Op. 560</a> (Aug. 2005).
If a PEO seems like it might be an option for you or your firm, check your state&rsquo;s statutes, and your state&rsquo;s ethics opinions. &nbsp;The <a href="http://www.napeo.org/">National Association for Professional Employer Organizations</a> also might be a useful resource.
&nbsp;

core/freeform

Ethics

Legal Ethics, Professional Responsibility and the Business of Law

New opinion gives guidance on “professional employer organizations”