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Bench & Bar of Minnesota is the official publication of the Minnesota State Bar Association.

RealLaw: How the Rest of Us Practice

0516-Real-LawBigLaw attracts a lot of attention these days, but it’s the rest of us that the average American envisions when he or she thinks about lawyers and what lawyers do. Apart from the fact that we have no choice but to adapt to the ever-increasing barrage of changes in technology and communications media that affect us directly, private practitioners outside the realm of BigLaw continue to practice what I’ll call “RealLaw”1 on a daily basis in much the same way we always have.

To be sure, the newest generation of lawyers is far more comfortable and adept with the new technology than the pre-2000 Luddites. But in a very real way, it is the practitioners of RealLaw who deal most directly—and most regularly—with members of the general public on legal matters. What we do, and how well we do it, is still, for most people, the public face of the legal profession.

Sole Practitioners

As a matter of history and self-image, sole practitioners constitute the legal profession’s equivalent of the celebrated “yeoman farmers” of the frontier age whose independence and self-sufficiency provided much of the economic and philosophical foundation of our nation. Think no further than Abraham Lincoln for the underpinnings of our entire profession and the best possible exemplar of a successful lawyer with the right combination of intelligence, personality, verbal skills, and perseverance.

We’re talking about a very big chunk of the men and women who make up the legal profession. These are the sole practitioners—the “solos” with the courage and pluck (and in some cases, perhaps, lack of other options) to go it alone or in very small groups. These are the lawyers who “eat what they kill.”

For decades, at least according to the ABA 2005 counts, solos made up about half of the entire lawyer population,2 though most of the state bar surveys I have reviewed suggest a substantially lower percentage. Fewer than 25 percent of Iowa lawyers, for example, self-reported a firm size of one in 2011.3 In Alabama that same year, 41 percent of surveyed lawyers identified themselves as being in solo practice.4 Other surveys seem to support the hunch that solo practice’s share of the market has fallen, but the information is too piecemeal to be significant; if Benjamin Barton’s study (described immediately below) accurately posits 354,000 solos in the U.S. in 2010 based on IRS records, this would translate to 29 percent of the ABA’s 2010 count of 1.2 million total U.S lawyers.

One reason to focus on sole practitioners first is that the solos’ current financial experience was the subject of an extensive recent study heavily covered by Bench & Bar one year ago in the May-June issue. The issue featured a then-recent analysis of the plight of sole practitioners by Benjamin Barton, a professor of law at the University of Tennessee and author of Glass Half Full: The Decline and Rebirth of the Legal Profession.

Barton’s research rests on the fact that since the 1960s, the IRS has collected and published income data for all American lawyers filing as individual practitioners. His review of this specific type of IRS information revealed steadily deteriorating financial outcomes for solos. Glass Half Full dramatically summarizes his findings. After establishing that sole practitioners in 1988 on average earned $69,955 (in constant dollars adjusted to 2010 values), he states,

“[There has been a] 30-year decline in small firm and solo practitioner earnings. Recent coverage of the legal profession describes the market for lawyers collapsing, starting in 2008. That year does mark the start of BigLaw’s struggles…but the majority of American lawyers who work in small firms or as solo practitioners have faced grim prospects since the mid-1980s. Between then and now solo practitioners have seen a 34 percent decline in real income. According to IRS data drawn from actual tax returns, the average solo practitioner earned $46,560 in 2010….”5

This figure of $46,560, he emphasizes, is not the starting gross income for this huge group of lawyers. It is the average earnings of 354,000 lawyers who identified themselves as solo practitioners on tax returns filed in 2010. 

Barton’s number seems impossibly grim to me. First, I suspect that few sole practitioners would readily agree with Barton’s conclusions. My own 45 years in an urban practice, most of it with a firm of between eight and 12 partners, gave me reasonably frequent exposure to sole practitioners. My lasting impression is that the range of financial outcomes for solos is very, very wide, just as it is for small and midsize firms. The ranks of solos encompass everything from large market personal injury, criminal defense, family law and small business specialists (some of whom are making extremely good incomes from very busy practices) to part-time small town generalists working from home. We also know that many solos, especially younger ones, practice part-time in order to raise a family.

I knew that practicing law in a small town, rural setting would allow me the opportunity to be a well-rounded and better balanced person—both considering the broad scope of legal work I could pursue in a general practice as well as my extra-curricular activities….The most rewarding part of my practice is when I can accomplish that by efficiently resolving their legal issue, or at minimum, explaining concepts in a way they can understand so they can walk away better understanding their legal issue. I greatly enjoy the opportunity to directly interact with clients on a daily basis… The variety and unpredictability of these opportunities serve as a nice balance to the sometimes monotonous work of title opinions and real estate closings.

– Sole practitioner Greg Schieber, “Colleague Corner,” Bench & Bar of Minnesota, 03/2016

If in fact the average sole practitioner makes under $47,000 per year, and has been on a trajectory toward that figure for 30 years, I strongly believe the organized bar would have heard a great deal about it long, long before 2015, and I suspect the MSBA, and most other bar associations, would have tried to address the issue in some public way. If Minnesota solos have been clamoring on this subject during the last decade or two, I simply missed it. After all, if the average solo earns less than $47,000, then by definition a very substantial share of all solos earn much less than that. Many would necessarily be below the poverty level.

At the same time, we know that for the last decade, thousands of unemployed or badly underemployed lawyers just emerging from law school have been searching—often unsuccessfully—for a paying position in a shrinking legal market. As these un/underemployed lawyers search for employment, it is reasonable to suspect that many are identifying themselves as self-employed lawyers on their tax returns. If that suspicion is correct, it would have an obvious impact on the numbers Barton looked at.

Some (but not enough) bar associations periodically survey their members on all sorts of economic issues, including full-time/part-time status, compensation, and many other factors. These surveys vary in date, quality, methodology, size, and (ultimately) reliability. The exemplars that follow, however, strongly suggest that solos (at least those who respond to bar surveys) may not be faring as badly as Barton suggests:

  • A 2011 Colorado Bar Association survey found median income of $90,000 for solos in full-time practice ($80,000 if not limited to full-time practitioners);6
  • the State Bar of Michigan found 2013 median income of $75,000 among solos with offices outside their home;7
  • the New Hampshire Bar Association in 2013 found average income of $75,000 for solo practitioners with offices outside the home, and $65,000 if they officed at home. Their average billing rate was reported at $200 per hour;8
  • New Mexico solos reported average 2011 pre-tax income of $95,713, and median pre-tax income of $75,500;9
  • Oregon’s 2012 Economic Survey reported median income for full-time solos at $90,000, with average income significantly higher.10

This admittedly small selection—other surveys I found were not as specific—suggests that panic is distinctly premature for sole practitioners. Some of them, to be sure, may not originally have set out to be solos. It may have been the only available option. Some almost certainly chose to practice alone in order to blend family and career. Most undoubtedly understood when they decided to go it alone that (as these same surveys uniformly indicate) income is generally better in law firms, and better in large firms than in small firms. None of this should come as a surprise to anyone. So while Barton’s calculations are sobering, I offer the possibility that his conclusions might overstate the financial plight of solos.

At the same time, sole practitioners are particularly vulnerable to the economic and technological changes we have been looking at. Barton certainly understands that the current rapid advances in law-related technology are imposing a disproportionate economic impact on solos:

“[A]nd the bad news has just started for these lawyers, who now face new competition from online providers of legal services such as LegalZoom and Rocket Lawyer, as well as the proliferation of websites offering free or very inexpensive legal advice.”11

Small Firms

As we move up the practice-size scale to law firms, most of us know from experience that the financial picture is pretty well all over the map. Small boutique firms can earn astounding revenues for their lawyers; larger firms can and do struggle.

Miscellaneous statistics on lawyer earnings can be marshalled, but information from different states is not particularly comparable: Comparing income statistics for Wyoming lawyers with income statistics for New York lawyers would be neither instructive nor productive. The snippets of information below reflect regional similarities and differences but do not lend themselves to reliable conclusions at a national level. Unhappily, there isn’t really as much information of this sort out there as you might think.

Half a dozen years ago, the Twin Cities metro area was the 12th largest U.S. market in terms of total law firm payrolls, with over $1.3 billion, a figure that includes all firm employees. Despite the dollar volume of this market, the same area ranked only 20th in terms of lawyer earnings.12

Earnings gaps between male and female lawyers continue to be the rule, not the exception. Virtually all of the surveys mentioned elsewhere in this chapter confirm this gap, and the size of the gap is not negligible.

The few useful surveys I found offered (in varying formats) at least some information on lawyer incomes in various practice settings. I have tried to summarize them in a table (below).

 

Earnings Gaps
Michigan 

2013

New Mexico

2011

Colorado 

2011

Florida 

2011

New Hampshire 2013
Median Mean Median Mean Median Mean Median Mean Median Mean
Firm: Partner $215,000 $301,000 $175,000 $146,000 149/161/348,000 189/197/409,000 $180,000 $130/191,000
Senior Associate $105,000 $123,000 $80,000 $78,000 firms of 2-7 /
8-29 / 30+ partners
$70/84/115,000
$76/89/122,000
firms of 2-7/8+ ptnrs, median only
Associate $70,000 $79,000 $67/86,000
Federal Employee $111,000 $112,000 $108,000 $104,000 $65,000 $96,000 $60,000
State Employee $90,000 $67,000 $67,000 $67,000 $72,000 $77,000
Corp. In-House $125,000 $167,000 $132,000 $132,000 $131,000 $170,000 $100,000
Legal Services $55,000 $57,000 $53,000 $52,000 $45,000 $45,000

 

If anything, the table confirms what I think we all know:

  • There is a wide range of outcomes for lawyers in all settings.
  • Government lawyers are not as well paid as they should be, and some states are far below fair pay for attorneys who have chosen to serve the public sector.
  • The abysmally low pay available to lawyers willing to help people who cannot afford to hire an attorney reflects our collective failure to deliver on our duty to assure adequate representation for everyone. (I recognize that this is a broad social obligation—not just the obligation of lawyers—but I submit that lawyers should take the lead in rallying public attention and funds to this need.)
Disruptive Pressures

Back in the section on lawyer pay, we looked at the ways in which solo and small firm practitioners were being challenged by the triple whammy of low-cost, automated solutions to many simple legal needs, rising client expectations, and the stagnating or declining real incomes of their potential customer base. These pressures are reflected in the contemporary dialogue about “alternative legal models” that seek to accommodate the changing shape of the legal market and to develop ways for lawyers to make stable, decent livings in the face of continuing change.

Hence all the talk about concepts such as “unbundled legal services,” “alternative billing practices,” and “limited-scope representation.” No matter the label, each of these impulses is an effort to come to terms with mounting, technology-bred competitive pressures and a clientele no longer able (or at least less willing) to pay traditional hourly rates.

Small-practice lawyers everywhere are scrambling to find ways to make their services more affordable and attractive. So perhaps, in one case, they simply prepare a set of legal documents for a fixed fee—while, in another matter, they may only write a brief, or attend a hearing, or help a pro se litigant prepare for a hearing. Some lawyers, too, are augmenting or replacing hourly pricing models by offering other billing options, including flat fees for certain tasks and outcome- or value-based billing in which the fee varies according to the result.

Beyond those solo lawyers whose work consists mainly of direct service to clients, there appears to be a growing cottage industry of lawyers undertaking some facet of case work that is subcontracted to them by other lawyers. (So far as I know, there is no real data on this trend.) One such operation, the Minnesota Freelance Attorneys Network collective, describes its services this way:

“The clients of freelance attorneys include solo practitioners, law firms of every size, and in-house counsel. Distinct from the historical notion of a contract attorney, a freelance attorney works as an independent contractor and can take on a variety of projects, including legal research and analysis; drafting and editing pleadings, motions, memorandums, and appellate briefs; document review and analysis; strategic consulting and file review; and more.”13

But there may be a silver lining of sorts in this cloudy forecast: The market that today’s legal service innovators are working to tap—the segment of the population that can’t afford a market-rate lawyer yet doesn’t qualify for low-income legal aid—is both huge and growing. It seems likely that technology-driven online legal services will claim a substantial portion of that market. But it appears there is also great potential here for real, working lawyers, particularly if they are willing to master time-saving technologies and become more creative about their approach to fees and to the scope of services they offer prospective clients.

There’s really no way to “sum up” a section that covers the million-plus lawyers who are not part of BigLaw. In some respects, we are all part of an expanding professional universe in which new practice areas are constantly appearing as old ones phase out, and as new technologies solve old problems but create new ones we could not have predicted. And yet a client’s first impression when walking in the door of a law firm of any size today and sitting down with a lawyer is probably very similar to the first impression of a client walking in the door decades ago. In general, the client’s legal needs and desired outcomes have probably not changed much. The most obvious changes start to appear when the topic of fees and lawyer overhead costs are added to the mix.

The profession has always adapted to change, and continues to do so. Lawyers know their choices and make their choices and for the most part are comfortable with them. Most lawyers are proud to be lawyers, at least most of the time.

But as we step back and look at the big picture, we see that much is changing, and changing fast. Those of us who are/were lucky enough to find our niche and practice our profession for a whole career can barely imagine the demographic and economic forces at work on law students, newly minted lawyers, BigLaw associates, sole practitioners, women and minorities, large consumers of legal services, and so on. And yet time and law march on, and when we talk about law, we are talking about a tiny slice of time in the overall life of law. The best we can do is step back and remember what our “profession” really is and to try to make sense of how we might nurture that profession as the changes keep coming at us.

 

Next – On Edge: The Future of the Profession

 


Notes

1 “RealLaw” is used with the permission of Norwalk, CT attorney Joseph Mulvey, whose website is reallaw.com.

2 ABA Lawyer Demographics 2015, American Bar Association, http://www.americanbar.org/content/dam/aba/administrative/market_research/lawyer-demographics-tables-2015.authcheckdam.pdf 

3 2011 Economic Survey of Legal Practice in Iowa, Iowa State Bar Association, http://c.ymcdn.com/sites/www.iowabar.org/resource/resmgr/Files/2011_Economic_Survey.pdf 

4 Economic Survey of Lawyers in Alabama 2010, Alabama State Bar Association, https://www.alabar.org/assets/uploads/2014/09/04042012_Economic-SurveyofLawyersinAlabama2010Report.pdf 

5 Benjamin Barton, Glass Half Full: The Decline and Rebirth of the Legal Profession (Oxford University Press 2015), pp. 5-7.

6 The 2012 Colorado Bar Association Snapshot Economic Survey Final Report, Colorado State Bar Association, http://www.cobar.org/repository/LPM%20Dept/Economic%20Survey/Snapshot%20Final%20Report.pdf, p. 12

7 “Economics of Law Practice in Michigan: 2014 Attorney Income and Billing Rate Summary Report,” State Bar of Michigan, 07/2014; http://www.michbar.org/file/pmrc/articles/0000151.pdf 

8 “Economic Trends in the NH Legal Market,” New Hampshire Bar Association,  https://www.nhbar.org/publications/EconomicSurvey-2015-RatesResultsExplained.asp 

9 “The Economics Of Law Practice In New Mexico: Lawyer Compensation,” State Bar of New Mexico 09/2012, http://www.nmbar.org/NMBARDOCS/PubRes/Reports/2012LawyerCompensationSurvey.pdf 

10 Oregon State Bar 2012 Economic Survey, Oregon State Bar, https://www.osbar.org/_docs/resources/econsurveys/12economicsurvey.pdf 

11 Supra note 5.

12 “What America’s Lawyers Earn,” Rachel Zahorsky, ABA Journal 3/1/2011 http://www.abajournal.com/magazine/article/what_americas_lawyers_earn 

13 Minnesota Freelance Attorneys Network, “About MFAN,” http://freelance-attorneys.com/about/ 


ABOUT THE AUTHOR

Wood R. Foster, Jr. practiced law in Minneapolis from 1968 through 2013, most of it as a litigator with the firm now known as Siegel Brill. He served as HCBA president in 1992-1993 and as MSBA president in 1999-2000. He conceived and edited “For the Record: 150 Years of Law and Lawyers in Minnesota,” which was distributed to all lawyers and libraries in Minnesota in 1999. Wood served as a member of the Lawyers Professional Responsibility Board for eight years beginning in 2001. He was a founder, 1993 president and 30-year board member of the Advocates for Human Rights. As a retiree, he works one day each week with the “St. Paul Regulars,” a Habitat for Humanity crew.  

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