Can you mark up a contract attorney's time? Billing rules for outsourced lawyers

Start with what is actually on record, because it is less than the citation suggests.

ABA Formal Opinion 08-451, dated August 5, 2008, is the American Bar Association's opinion on outsourcing legal or nonlegal support services.

The ABA distributes the original as a paid download, which this research did not obtain; everything this page says about the opinion comes through a second document — Illinois State Bar Association Opinion 19-04, which quotes and discusses it.

So the page describes 08-451 only as the ISBA records it, and quotes none of its text.

The conclusion the ISBA records is about responsibility, not pricing: 08-451 concluded that a lawyer may outsource legal or nonlegal support services to other lawyers or nonlawyers outside the firm, provided the lawyer remained ultimately responsible for those services under Model Rules 5.1 and 5.3.

Notice what is missing from that conclusion.

Nothing our research could verify says the opinion sets a markup percentage, endorses one, or forbids one — the markup question, meaning what a firm may charge a client over and above what it pays an outside lawyer, is not answered by anything on this page's record.

An article that quotes 08-451 directly on markups is quoting an authority we could not read.

The model-rule text has moved since 2008, and again the account is the ISBA's: the ABA's 2012 amendments to the Model Rules added outsourcing guidance to the comments to Rules 1.1 and 5.3, and did not adopt 08-451's standard of treating outsourced lawyers and nonlawyers as if directly affiliated with the firm.

The comments to the model rules carry the outsourcing guidance; the affiliation framing did not become model text.

Two standing caveats before the rest of the page.

An ABA formal opinion interprets the model rules — it is not itself the rule in your state, and it binds no state; the version your state adopted controls.

And outsourcing as a decision — which tasks travel well, the vendor diligence, the supervision file — is its own topic, covered in our guide to outsourcing legal work.

Contract lawyer time can reach a client's invoice through two doors: as a cost the firm passes through at what it pays, or as part of the fee the firm charges for legal services.

The distinction matters because the rules this page cites attach to a fee: reasonableness and fee-division standards are written about fees, which is why the lane an invoice sits in is the first thing to identify.

The question has an ABA address.

ISBA Opinion 19-04 cites two earlier ABA formal opinions that bear on the question — Formal Opinion 88-356 on temporary lawyers, and Formal Opinion 00-420 on billing contract lawyers' costs.

Our research did not read either opinion, so this page will not tell you what they conclude; a title is not a holding.

If your firm is pricing contract lawyer time, those two opinions are the ABA documents this record points to on the question, and your state bar's ethics counsel can tell you how your state treats them.

What no source on record supplies is a number.

Our research found no source establishing a standard markup or origination-credit percentage for contract lawyer time — the split is set firm by firm, not by a rule of thumb.

The rules this page cites supply conditions, not percentages.

The engagement structure decides which rules reach the invoice.

A contract attorney engaged as a separate practice raises the fee-division question taken up below; a lawyer working inside your firm is a different structure with a different frame.

How to structure and staff the engagement in the first place is the hub's topic — our guide to hiring contract attorneys covers levels, screening and onboarding — and what the market pays is a separate question from what you may bill, covered in our guide to contract attorney rates.

The clearest rule on this page's record is an Illinois one.

ISBA Opinion 19-04, an October 2019 advisory opinion from the Illinois State Bar Association, states: "Disclosure to, and informed consent by, the client will ordinarily be required."

Informed consent, the same opinion says, is "always required if the lawyer delegates or transfers complete or substantial responsibility for a matter to an unaffiliated lawyer" — and a matter handed to a contract attorney who is not part of your firm is that scenario whenever what moves is complete or substantial responsibility for it.

Scope that carefully.

It is one state bar association's advisory reading of the rules — persuasive reasoning rather than a statute, and Illinois's rather than yours.

The rules your state adopted control, and another state's bar may read them differently.

What the opinion establishes is the default posture: a client whose work is moving outside the firm is ordinarily told and asked.

What our research does not establish is the content of that disclosure.

Nothing on record specifies whether a firm must tell the client what it pays the contract lawyer, or how an invoice must present the difference between that and the amount billed; nothing on record fixes the timing of the conversation either.

Those are exactly the details to settle with your state bar's ethics counsel while you are designing the arrangement — not after the first invoice has gone out.

When the contract attorney practices through a firm of their own rather than working as part of yours, the fee question can change shape: you may no longer be one firm pricing its own services, but two firms dividing one fee — whether paying the contract lawyer counts as a division is not settled by anything our research verified.

ABA Model Rule 1.5(e) allows a division of a fee between lawyers who are not in the same firm only if the division is proportional to the services each lawyer performed, or each lawyer assumes joint responsibility for the representation; the client agrees to the arrangement in a confirmed writing that includes each lawyer's share; and the total fee is reasonable.

Those are the model rule's conditions — the ABA writes model texts, and the version your state adopted is the one that governs your firm.

Note what the rule supplies and what it does not: three conditions, no percentages.

A firm looking for a standard origination split will not find one in the rule, and our research found no source establishing one anywhere else; the split between firms is set by the firms.

One condition is the one that exists only if someone drafts it: the client's agreement must sit in a confirmed writing that includes each lawyer's share.

A division that is proportional, reasonable and agreed in conversation — but never confirmed in writing — has not met the model rule's terms.

The engagement structure is the first thing to settle for that reason: whether the contract attorney invoices as a separate practice or works inside the firm bears on whether these conditions apply at all, and how your state treats a given structure is a question for your state bar's ethics counsel.

Billing is one side of the arrangement.

The other side — who answers for the work — is where the opinions are clearest.

As the ISBA records it, 08-451 concluded that a lawyer who outsources services remains ultimately responsible for them under Model Rules 5.1 and 5.3 (the summary in the first section above; the ABA original stays unread here).

ISBA Opinion 19-04 works in the same register: outsourcing is allowed if it contributes to competent representation, with reasonable confidentiality and conflict measures.

Rules 5.1 and 5.3 are the supervision rules.

On the model text, Rule 5.1 asks partners and lawyers with comparable managerial authority to have measures giving reasonable assurance that the firm's lawyers conform to the rules of professional conduct, and asks a lawyer with direct supervisory authority over another lawyer to make reasonable efforts toward the same end.

Rule 5.3 carries the matching structure for nonlawyer services: on the model text, partners and lawyers with comparable managerial authority must make reasonable efforts to ensure the firm has measures giving reasonable assurance that nonlawyers' conduct is compatible with the lawyer's professional obligations (5.3(a)), and a lawyer with direct supervisory authority over a nonlawyer owes reasonable efforts to the same end (5.3(b)).

A contract attorney is a lawyer, so the lawyer-supervision rule bears on the outsourced lawyer's work — with Rule 5.3 in the picture whenever nonlawyer support travels with the engagement.

What those measures look like for a specific engagement — which conflicts check runs, what the confidentiality instruction covers, who reviews the work — is a mechanics question, and the sources on record state the standard rather than the checklist.

Our guide to outsourcing legal work builds the vendor file, and our guide to hiring for your law firm is the employer map this page sits inside.

Employer information, not legal advice. This page describes ABA model rules and ABA formal opinions as one state bar association's opinion records them, plus that association's advisory view; the rules your state adopted control. Confirm billing, disclosure and fee-division requirements with your state bar's ethics counsel before you structure the arrangement.