Law

The legal industry is in a constant state of flux as a result of changes in education, business developments, globalization, and many other factors. Law firms now must compete with non-lawyer service providers for customers, and many are trying to increase profits by hiring more contract workers and making it harder for attorneys to become partners. Some legal services are being off-shored to foreign countries, where wages for legal-industry workers are lower, and others are being in-shored from big U.S. cities to smaller towns, where the cost of doing business is not as high. Lawyers are attempting to stay competitive by pursuing LL.M. degrees and honing their technology skills. (Robert Half Legal reports that employers “increasingly consider technical aptitude a preferred skill for attorneys and a mandatory requirement for associates involved in document review and e-discovery matters.”) The worlds of social media and law are meeting in interesting (and sometimes frustrating ways) for law firms. Reuters reports that some law associates are seeking to become social media influencers on TikTok and other sites by offering legal career advice for aspiring lawyers (okay in most instances), but also seeking big financial payoffs through paid partnerships with fashion companies and other businesses (not allowed at many firms). Some firms are willing to work with associates to allow such arrangements on a case-by-case basis, while others strictly forbid such arrangements. These are only a few of the developments and trends that will shape the future of the legal industry.

Artificial Intelligence and the Legal Industry

Artificial intelligence (AI) is technology that can be programmed to make decisions which normally require human thought and act independently of humans. Machine learning (ML) is a method of data analysis that incorporates artificial intelligence to help computers study data, identify patterns or other strategic goals, and make decisions with minimal or no intervention from humans. Generative AI (e.g., ChatGPT, Gemini, DALL-E) is a form of machine learning algorithms that can be used in a variety of ways, such as creating new content (including text, simulations, videos, images, audio, and computer code), helping developers write code and identify errors more efficiently; analyzing and organizing vast amounts of data and other information; and more quickly identifying solutions to problems. The data analytics firm IDC reports that enterprises will invest nearly $16 billion worldwide on generative AI (GenAI) solutions in 2023, and spending is expected to reach $143 billion in 2027 with a compound annual growth rate of 73.3 percent over the 2023-2027 forecast period.

The legal industry is increasingly using GenAI technology to save time and money by automating a variety of processes and help predict the outcomes for legal cases. Nineteen percent of legal professionals surveyed by the law technology firm Clio in 2023 said that they were using AI in some format. And 51 percent of respondents said that they wanted to use AI in the future in their practices. “Even in its earliest iterations, AI offers many applications for legal professionals,” according to Clio. Popular uses cited by Clio include:

• drafting letters or other legal content based on a set of criteria for a case
• identifying and summarizing key components from a set of documents or text
• reviewing a text for grammatical accuracy
• recommending strategies for legal situations, career advancement, and business development

Law firms are using off-the-shelf GenAI solutions such as ChatGPT to save time and money, but also re-engineering these products to work on legal tasks. At this point, most are steering away from using any type of GenAI that requires the utilization of their client’s data or other private information.

There is strong interest in AI from legal professionals, especially lawyers. In 2023, Clio surveyed legal professionals regarding their interest in GenAI. It found that 68 percent of lawyers, 54 percent of paralegals, and 48 percent of administrative staff wanted to learn more about AI.

There is also a fast-developing need for lawyers and other legal professionals who have AI expertise to represent clients who are developing and/or utilizing this technology. Demand is also growing for firms to represent those who have been accused of misusing this technology and those who believe they have been defamed by the use of AI, including by deepfakes or by using AI to create new content from a deceased celebrity’s past work. Deepfakes are videos, photos, and audio files that have been manipulated by machine-learning—specifically deep neural networks—to appear to make people say or do things they have not done in real life.

There are drawbacks to using AI. For example, legal secretaries, paralegals, human resources workers, and others who perform low-level tasks may lose their jobs or be asked to upgrade their training to work with these technologies or work in other positions at their employers. On the other hand, new job—such as AI programmer and AI editor—are emerging that will offset some job losses. Some legal professionals believe that AI is overhyped, but most industry experts disagree. “There is no question as to whether AI will categorically transform legal work,” says Clio in its 2023 Legal Trends Report. “Instead, lawyers should be asking how AI will impact their practices and what they are doing to prepare. The answer to these questions will prove critical since it won’t be long before lawyers who use AI will see significant advantages over those who do not.”

Despite the promise associated with GenAI, Clio also found that survey respondents expressed ambivalent perceptions of its trustworthiness and expected overall adoption of the technology. Forty-one percent believed that the use of AI would put them at risk of professional liability, 57 percent were concerned about client privacy and confidentiality issues, and 37 percent worried about copyright issues. Thirty-nine percent of respondents had concerns about losing client trust. And 37 percent of clients or potential clients who were surveyed by Clio said that they would be less likely to trust a lawyer who uses AI. This is a legitimate concern because “generative AI creates artifacts that can be inaccurate or biased, making human validation essential and potentially limiting the time it saves workers,” according to the tech analytics firm Gartner (An artifact in this context is new or revised content that is produced during the generative AI process.) For example, in 2023 a lawyer used the generative AI tool ChatGPT to conduct legal research and prepare a legal brief that cited non-existent cases as precedent. In addition to concerns regarding accuracy, other serious issues pertaining to the use of generative AI include the risk of incorporating gender, racial, and other types of biases into content, as well as the increased risk of cybercrime and fraud. These issues are currently being addressed by developers and tech companies.

Does Law School Need to Last Three Years?

Some law school students and recent graduates are questioning whether universities should revert to two-year curricula. Critics of the third year contend that students would be better off diving straight into the practice of law, which is where they learn the essential skills of the profession anyway. Many schools are now using the third year as a time to offer students specialized classes and experiences such as clinics, internships, seminars, and other activities that provide more practical preparation for working in the field. For example, the University of California-Hastings College of the Law launched Lawyers for America, in which third-year law students forego academic classes and instead obtain hands-on experience in law offices and district attorney offices.

Although the idea of eliminating the third year of law school has some merit, don’t expect the American Bar Association to allow law schools to shorten their curricula anytime soon—and most law schools are quite happy to keep things the way they are.

On the other hand, some law schools have begun to offer alternative schedules. For example, Southwestern Law School offers the oldest two-year J.D. program, known as SCALE (https://www.swlaw.edu/jd-llm-programs/scale-two-year-jd), in the United States. According to the program’s Web site, “SCALE offers flexible second-year curriculum created through a choice of summer session electives, second-year elective choices, particular externship placements, and honors programs participation.” The University of Dayton School of Law, University of Kansas School of Law, Drexel University Thomas R. Kline School of Law, and the Vermont Law School also offer two-year J.D. programs. It’s important to remember that two-year J.D. programs typically cost the same and require the same number of course hours than three-year programs do, but two-year programs allow students to enter the workforce more quickly and save a year of room and board.

Accelerated combined-degree programs are also becoming popular. For example, students can now complete J.D./M.B.A. programs at Northwestern University School of Law, Yale Law School, University of Pennsylvania Law School, and the Duke University School of Law in three years instead of the traditional four years.

Look for more schools to establish alternative schedules, in-person/online programs (such as the one offered by Loyola University Chicago School of Law), third-year experiential programs, and accelerated combined-degree programs in the future.

The Rise of the LL.M.

A growing number of attorneys are earning an LL.M., or master of laws, an advanced law degree that provides specialized legal training. There is a current trend toward specialization in the industry, and, in many cases, earning an LL.M. is an excellent way to increase one’s chances of landing a job and advancing in the profession, especially in specialized areas such as health law, environmental law, taxation, and intellectual property law. LL.M. programs, which typically last one year, are offered in many areas—such as business law, corporate law/corporate governance, dispute resolution, estate planning, health law, and litigation/trial advocacy. A first law degree is required for admission to an LL.M. program. LL.M. programs are not cheap, but most schools provide financial aid, and some employers help pay for tuition.

Competition from Non-Lawyers

Law firms increasingly must compete for customers with non-lawyer service providers, who are touting faster and less-expensive service, as well as assistance with technology. “Technology-enabled services allow alternative legal service providers (ALSPs) to provide higher value and take on different and more complex tasks,” according to the Thomson Reuters Legal Executive Institute. “Some ALSPs may rely on third-party technology, but others are developing proprietary systems in search of sustainable competitive advantage. Further, the technology being adopted is often state-of-the-art; about a quarter of ALSPs interviewed say their systems use artificial intelligence.”

Many ALSPs are small, but some are not. For example, the law and business company Axiom Law employs more than 14,000 lawyers in offices in the United States, Canada, Australia, United Kingdom, Germany, Switzerland, Hong Kong, and Singapore. Axiom says that more than 60 percent of Fortune 100 companies are its clients.

These are the most-common tasks that ALSPs are taking over from law firms (according to the Alternative Services Legal Providers 2023 report from the Thomson Reuters Institute):

1. e-discovery
2. legal research
3. litigation and investigation
4. consulting on legal tech
5. document review/coding

Legal technology consulting has increased rapidly in recent years as an in-demand service. “Consulting on legal technology is a fast-growing and promising use case and, for the largest law firms, the second-most common reason to use an ALSP,” according to the institute. “More than one-half of large law firms use ALSPs for consulting on legal technology, as do more than 37 percent of midsize law firms and 31 percent of small law firms.”

The Center for WorkLife Law at the University of California-Hastings College of the Law has identified five major delivery formats:

1. secondment firms, which provide lawyers to work on a part-time or temporary basis for clients
2. law and business advice companies, which, according to the center, “combine legal advice with general business advice of the type traditionally provided by management consulting firms”; Big Four accounting firms—Deloitte, EY, KPMG, and PwC can be categorized under this format or listed in a separate competitor category to traditional law firms
3. law firm “accordion companies,” which provide networks of experienced lawyers to satisfy short-term staffing needs in law firms
4. virtual law firms
5. innovative law firms and companies, which “typically offer specialized services under special fee arrangements or service delivery models that differ significantly from traditional law firms”

Law firms are increasingly using the services of ALSPs, although demand is strongest among large firms. “Major law firms are also pressured by their clients to do more with less which makes ALSPs an excellent option for BigLaw players seeking to quickly expand or contract their workforce, offload routine matters, enlist specialized expertise, and support client needs with tech-centric offerings,” according to “Why Choose an ALSP?,” a 2023 article in Law Technology Today. But the relationship between ASLSPs and established law firms (especially BigLaw) and corporate law firms is far from perfect. Sixty-two percent of law firms surveyed by Thomson Reuters Institute for its ALSP 2023 Report said that their concerns about work quality affects their willingness to use ALSPs. Forty-six percent of corporate clients felt the same way. Another major concern was trusting ALSPs with confidential client information.

Some law firms are taking advantage of the ALSP model by establishing partnerships with existing ALSPs. “Increasing numbers of law firms say they have established formal partnerships with ALSPs, potentially another contributor to ALSP growth,” according to the Thomson Reuters Institute. The most common practice areas for such relationships include intellectual property management, document review and coding services, and e-discovery services.

Alternative legal service providers (ALSPs) now comprise a $20.6 billion segment of the legal market, according to the Alternative Legal Services Providers 2023 Report, from the Thomson Reuters Institute, the Saïd Business School at the University of Oxford, and the Center on Ethics and the Legal Profession at Georgetown Law. This was up significantly from $10.7 billion in 2017. “Both law firms and in-house counsel are increasingly seeing the value of alternative legal services providers,” said James W. Jones, a senior fellow at the Center on Ethics and the Legal Profession at Georgetown Law and the report’s lead author. “Meanwhile, ALSPs are expanding the services they offer to law firms and corporate law departments by providing specialized services, improving cost efficiency, and delivering greater flexibility in headcount.” With so much money on the line, this issue will remain a hot-button topic for years to come. This trend will continue to reconfigure the practice of law at law firms and in corporate legal departments.

Globalization

More law firms are opening offices in foreign countries, some U.S. firms are merging with foreign firms, and an increasing number of lawyers are practicing abroad (at law firms, in corporate settings, and for LPO companies). In fact, U.S. firms had 766 international offices with more than 20,000 lawyers in residence in 2014 (the latest year for which data is available), according to Law Practice Today, up from 273 international offices with around 4,000 lawyers in 1992. Some bar associations, such as the ABA (specifically, its Commission on Ethics 20/20), are seeking to make it easier for U.S.-based lawyers to practice abroad. This trend has been fueled by the rapid growth of the Internet, improvements in data security, the automation of basic legal processes, and other factors.

Globalization also has a downside. U.S.-based law firms must now compete for business with foreign law firms and other legal-service providers. These firms and providers may charge lower fees, but many of them lack the high practice standards of top U.S.-based firms. Some firms are encountering an increasingly competitive—and often protectionist—legal environment when they try to spread their wings internationally.

Some countries, such as Canada, are friendlier toward U.S. lawyers. “More American and international law firms are expected to enter the Canadian legal market in the wake of aggressive expansions by firms Mintz, Levin, Cohn, Ferris, Glovsky and Popeo and Cozen O’Connor,” according to a 2023 article at Law.com. Other U.S.-friendly countries include South Korea, Hong Kong, Singapore, and, to a lesser extent, England.

Partner Problems

Many law firms, especially larger ones, are promoting fewer associates to partner and making it more difficult for attorneys to become partners. In addition, making partner is no longer a guarantee of either financial or employment security. Partners are earning lower incomes at some firms, and their offices are also shrinking (from the current target ratio of 500 to 600 square feet per lawyer, according to the commercial real estate services firm Cushman & Wakefield, to 500 square feet in the next decade) due to advances in technology and increases in telecommuting. “The target square-footage-per-attorney ratio for 2028 is 472 square feet, which would represent a 5.7 percent decrease,” according to the firm’s 2023 Bright Insight Benchmark Survey. Male partners are still earning significantly more on average than female partners do. Some firms are even establishing hour and revenue goals (to improve partner productivity) and shedding partners who aren’t pulling their weight (in order to increase profits). Some firms have established individual productivity targets for its partners. Those who can’t meet the targets receive additional training or are sent to other, busier offices.

“Some firms have recognized the benefits of retaining good lawyers and have begun to offer alternatives to partner tracks, enabling career progression for associates who either don’t want to follow that path or are unlikely to meet the criteria for partnership at their firms,” according to the 2023 Report on the State of the Legal Market from Thomson Reuters Institute.

A growing number of firms are creating a middle-tier position of non-equity partner; a lawyer in this classification receives only a small share of the firm’s profits, with most of his or her earnings coming from a fixed salary. Some non-equity partner positions are stepping-stones to equity partner positions, while others represent the employment ceiling for individuals at that firm.

Law School Job Placement Controversy

Earning a law degree used to mean that you were virtually assured of landing a great job. Law schools touted this fact on their Web sites for years, listing job placement rates of 90 percent or higher. But, at some law schools (such as New York Law School, Chicago-Kent College of Law, and Southwestern Law School), these job placement rates turned out to be just “smoke and mirrors.” Investigations have shown that some schools have been reporting misleading placement data for their graduates. When citing job placement percentages for lawyers, some law schools have included temporary workers and graduates holding any type of job—including jobs that do not require a law degree—in their official tallies. In fact, only 78.6 percent of the graduating law class of 2018 from American Bar Association-approved law schools landed a job roughly 10 months after graduation for which passing the bar was a requirement, according to the ABA, up from 75.3 percent of graduates from the class of 2017.

Although this percentage has increased in years, the data shows that more than 15 percent of law school graduates do not land such positions roughly 10 months after graduation. This is disconcerting news to current law school students and recent graduates, especially those who believed that a law degree was a guaranteed ticket to a commensurate-level job. But many jobs are still available—especially for top students who attend upper-tier law schools. To increase transparency, the American Bar Association has taken steps to ensure the integrity of employment information by collecting data directly from law schools rather than from the NALP, an organization of law schools and legal employers. Some law schools, such as the University of Chicago, are publishing more comprehensive data on their Web sites to address student concerns about the integrity of job placement claims.

A Rise in Contract and Temporary Positions

More legal-industry employers are using contract and temporary workers in order to reduce costs and remain flexible in terms of staffing. This practice might be a good strategy for law firms, but it has both reduced the number of partner-track positions and lessened job security for attorneys. This trend can also be found in corporate settings, where general counsel are addressing heavy workloads by hiring more contract lawyers and paralegals rather than full-time attorneys.

Some recruiters caution that out-of-work lawyers are taking a big risk when they sign up for contract work. The reason? Some law firms won't hire former contract lawyers for full-time positions. Such law firms may believe that lawyers who have accepted contract work (especially in low-level positions such as document reviewers) are less capable than attorneys in full-time positions or that they may not want a full-time job and won't stay with a firm for the long haul, if hired. Some law firms simply use having worked as a contract lawyer as one of their criteria to eliminate job applicants, like having a low GPA or not having attending a top-tier law school.

Changes in Billing

By the late 1960s and early 1970s, most large and mid-sized law firms had moved to hourly billing. A billable hour is a unit of time used as a basis for constructing bills for legal services provided to clients; tasks such as firm meetings, some travel scenarios, pro bono work, and time spent talking with colleagues cannot be included in billable hours. The thinking behind this change was that attorneys who kept accurate time records and billed clients by the hour would earn more money than lawyers who set their fees using other methods. Firms began to base their budgets on the number of hours they expected their attorneys to bill at certain rates. At first, firms established reasonable billable-hour requirements. But during the 1990s, these requirements climbed higher and higher. Today it’s not uncommon for law firms to require associates to bill between 1,800 and 2,300 hours per year. Because not every hour worked is a billable hour, lawyers must work many hours over and above their firms’ requirements in order to reach their goals. Some firms are even awarding bonuses to lawyers who exceed their billable-hour requirements and penalizing those who fall short. As a result, attorneys are complaining of being stressed out and overworked.

Pressure from clients to reduce fees (not to mention client objections to charges for photocopying, and lawyer meals, etc.) has caused some law firms to switch from the billable-hour model to alternative fee arrangements (AFAs) such as flat, fixed, or capped fees. Legal professionals who were surveyed by Bloomberg Law in January 2023 said that just under one-third of their work was performed under an AFA, and lawyers most often reported utilizing flat fee AFAs over the past year.

Strong Demand for Lawyers in Rural Areas

“Large swaths of rural areas in every state have few lawyers of any kind, or no lawyers at all,” according to the American Bar Association’s 2023 Profile of the Legal Profession. The report goes on to say that “Attracting lawyers to small towns and rural counties has been a problem for years.” Law schools such as Drake University in Iowa, the University of Iowa, and Creighton University in Nebraska are working to place students in internships and permanent positions in rural areas. Some colleges and universities such as the University of Arkansas at Little Rock, the University of Nebraska at Kearney, and Wayne State College in Wayne, Nebraska are creating rural and solo practice programs to prepare law students to work in underserved areas. More than 20 states have established loan repayment assistance programs—some of which focus on attracting lawyers to underserved rural areas. Additionally, the ABA reports that “governments, law schools and bar associations are experimenting with solutions, including creating incentives for lawyers to move to rural areas and creating online law clinics, so clients don’t have to travel long distances.”

There are many pros and cons to working in rural areas. The pros include a lower cost of living, the slower pace of daily life (which may be a con to some), the opportunity to work in a close mentoring relationship with an established lawyer, and the diversity of casework (which might be surprising to some). One big drawback (which might be a deal-breaker for those with high law school debt): small-town lawyers typically earn much lower salaries than their urban counterparts. For example, the mean annual salary for lawyers working in New York City was $193,280 in May 2022, according to the U.S. Department of Labor. On the other hand, the mean salary for lawyers in non-metropolitan Central Kentucky was only $79,530. Other potential negatives include the slower pace of small-town life and the fact that most small towns have fewer cultural amenities than big cities do.