The Value of Having In-House Legal Counsel

What is In-House Legal Counsel?

In-house legal counsel are lawyers housed within an organization to handle legal matters involving that organization. This contrasts with outside counsel, who are external law firms or individual attorneys hired by organizations to work with that business on its legal matters. As organizations have grown in size and complexity, the role of in-house counsel has evolved and expanded. Throughout most of the 20th century, in-house counsel functioned primarily as generalist attorneys, advising senior leadership on issues ranging from risk management, regulatory compliance, contracts, and corporate governance, to litigation management, investigations, and employment law. The primary ethos of in-house counsel during this period was to align the organization with the law , placing the in-house counsel in an entirely servile role. Corporate strategy is often driven by the availability of legal resources and counsel recommendations in this model of corporate function. As the trend towards specialization increased, in-house departments began to hire subject matter experts in specific core competencies outside of trial strategy and litigation management. Today, large organizations often possess large in-house legal departments, filled with specialists that can provide counsel to senior leadership on a range of issues in the areas of business, securities, intellectual property, employment, contracts, financial securities, and privacy. For persons who have a passion for the law, and possess a desire to work with an organization, there are few positions as dynamic and interesting as those held in a large legal department.

Key Responsibilities of In-House Legal Counsel

Perhaps the most desirable position for many in the legal field is that of a lawyer in-house with a company. The opportunity to join the executive team, the ability to directly assist in the growth of your employer, and the chance to generally be viewed as a fundamental part of a successful enterprise are all major draws to the role. But regardless of the organization, the position must be taken seriously and in return grant you significant responsibility.
The primary responsibility of any lawyer is to ensure that the organization’s best interests are at the forefront at all times. This means understanding every aspect of the business and how the law may impact its functioning. You need to keep a watchful eye as to how the company is managed and directed, when it vests authority and control in others and when it retains it for itself. The lawyer’s job is not only to protect the company against harmful legal activity, but to foresee potential risk of future liability and eliminate those risks. Essentially, the lawyer is tasked with making sure the business does not lose its corporate "veil" and that its operations, assets and good name remain fully intact.
Since most in-house lawyers have been a member of outside legal firms before taking on their current role, there is a natural tendency to think of their job as focused solely on legal work. While you will almost certainly be responsible for at least some aspects of legal work, your duties actually go far beyond just those tasks. Generalized functions of in-house lawyers include:
Contract review and negotiation
Compliance oversight and assistance
Core risk management
Litigation oversight and management
Intellectual property maintenance and protection
General advice to the board of directors and executive team
Specific advice and tasks as directed by the board and executives
As an in-house lawyer, you can expect to play a central role in safeguarding the organization through risk management. Depending on the size of the company, this may also involve managing outside legal counsel responsible for litigation and related research. As a business grows and expands through mergers and acquisitions, outside counsel may also address issues such as antitrust, securities, tax and real estate.
In addition to this general advice to executives, in-house lawyers also provide specific advice to particular parties as needed. For example, if an executive is awarded a bonus or if company stock is sold, the lawyer may answer both general and specific questions. It is not uncommon for the board to turn to the in-house lawyer for more critical and confidential inquiries.

Benefits of In-House Legal Counsel

An increasing number of companies, both large and small, are opting to invest in an in-house legal expert. But what are the advantages of having in-house legal counsel and why are businesses are choosing to spend money on internal attorneys? Cost-effectiveness is often a key driver in this decision. Having an attorney on payroll as part of a larger team is more affordable than retaining an outside law firm on a perpetual basis to handle the on-call legal matters that arise on a daily basis. Furthermore, with a dedicated legal expert employed by the company, it is much easier to cost-analyze whether a matter should be handled in-house or outsourced.
Another major benefit of having in-house legal counsel is receiving personalized legal advice and guidance from someone who is already familiar with the way the company operates. Internal attorneys have the advantage of knowing the corporate assets, values and business practices of their organization inside and out. This provides for a more cost-effective and streamlined legal approach than would be possible with outsourced legal services. In-house legal counsel is also better positioned to determine the risk tolerance of a company and advise on the best legal alternatives for a particular business decision or transaction.
Additionally, the ability to prenegotiate rates with counterparts, advice on how to structure a transaction, and provide analysis on a deal or contract can be major advantages to having in-house legal counsel. Oftentimes, having a legal professional in-house allows the company to move forward with a prospective transaction more quickly and without hesitation.
Having in-house legal counsel on your team allows the company to explore and enter into novel business ventures without fear of getting stuck in thorny legal questions that can arise. Surprisingly, studies report that fewer than five percent of businesses employ in-house legal counsel however, a trend is increasingly on the rise and business are investing in legal counsel to gain an edge over their competitors.

In-House Counsel vs. Outside Counsel

Dissecting the differences between in-house counsel and outside legal counsel: in-house and outside legal counsel are both attorneys that help a client, but the similarities stop there. In-house counsel, an employee of the corporation, possess a unique combination of responsibilities generally not put upon outside counsel because of cost factors. The costs of outside counsel require that outside counsel be more specialized or focused on fewer issues for their clients. Outside counsel has very few clients at a time and focuses on specialist lawsuits, tax advice, expert witness testimony, litigation, or other specific matters. Outside Counsel’s matters typically last longer and have multi-year timelines for resolution, which limits the number of clients it can take on. When multiple outside counsel lawyers are placed on the same legal matter, the client has been granted an extraordinary discount for the services.
In contrast, in-house counsel are "jack of all trades" lawyers that are expected to provide a variety of different legal services to their employer. Costs often drive this decision because the economics of the legal system forces most corporations to have fewer external legal relationships. In-house counsel’s practice of law is typically defined by general corporate law, employee benefits law, labor issues such as wrongful termination and discrimination, consumer complaints such as defective product claims, privacy issues, and anything else that needs a lawyer. The business model for the majority of corporations requires this diversity of legal services to be performed in-house. The cost of outside counsel to no more than a few dozen mega-clients limits the amount of diversified clients to no more than a few.
Having in-house counsel does not mean outside counsel is no longer needed. Outside counsel is usually retained when substantial litigation occurs, when the size of the legal matter exceeds in-house staff expertise or where specialized legal services are needed such as litigation support or expert witness services. Outside counsel is thought of as the large legal matters or the "big guns" by in-house counsel. Outside counsel’s services are limited by actual legal services provided and what type of work was negotiated or developed. Outside counsel’s reduction of in-house counsel size or "cost balance" occurs at the beginning of the relationship between in-house counsel and outside counsel. Does the client need 3 partners, 6 associates, and a paralegal, or are 2 lawyers adequate to the task? Outside counsel’s legal expertise, familiarity with the jurisdiction, trial experience, and other factors all play a role in locating the "sweet spot" of in-house counsel and outside counsel costs. Outside counsel economics is further complicated because most of in-house counsel’s work product is given to outside counsel, which increases costs. This is counterintuitive to the "keep it all in-house" business model of many corporations. Outside counsel can only use in-house counsel’s work product or time if it is paid for by the corporation or client. Outside counsel will not, and cannot, use in-house counsel’s work product to save money for the corporation.
In the end, "who pays who" is the most important item out of all the factors mentioned so far. Understanding the financial arrangement between the client, in-house counsel, and outside counsel is a necessity to making the system fairer to everyone involved.

Common Challenges for In-House Legal Counsel

In-house legal counsel are tasked with a multitude of responsibilities, and their workload often comes at a high price. They spend long hours on high-value work such as mergers and acquisitions and corporate compliance. With the continual development of new technology, in-house counsel are expected to have cross-functional expertise – not only legal know-how but also knowledge of technology, business practices, and policy. The constant increase in regulatory guidelines means that counsel have their hands full when it comes to governance as well . This is evident from the FACC 2018 Corporate Counsel Survey, where 41% of in-house counsel responding reported having less than three working days per month left over to meet professional development goals. From finding time for necessary corporate travel, to finding the work-life balance more generally, in-house counsel face a number of challenges. These difficulties come at a price – the burnout high workload demand places on in-house counsel. Companies must find a way to ensure their in-house legal counsel are fueled to handle these demands, or else they will be left with high turnover and additional recruitment costs.

Qualifications and Skills of In-House Legal Counsel

A successful in-house legal counsel must possess a diverse set of skills and a broad range of experiences. Understanding these requirements is crucial as companies seek to navigate complex legal landscapes. The educational background for in-house legal counsel typically includes a Juris Doctor degree from an accredited law school, and in some instances, advanced degrees in relevant subjects such as tax law, intellectual property law, or business administration. Other qualifications will vary from one organization to another, but several key characteristics stand out. First, in-house legal counsel should have superior attention to detail. Litigation proper and general compliance to jurisdictional rules are the most common areas where insights are valuable. Next, attorneys in-house counsel should be strong communicators. Whether in writing or in person, a person who possesses and hones this valuable skill can only enhance their value to their organization. Going beyond skills, in-house counsel is typically expected to show initiative and have strong critical reasoning and business management skills. Finally, in-house legal counsel will sometimes play the role of a business analyst as they will be considered trusted advisors playing a role in a range of high-level decision-making processes. Professional experience in the same industry theoretically makes in-house legal counsel more effective. Counsel who are already well-versed in the goals and challenges of their organization and its parent company or parent organization logically have a leg up on counsel without this same exposure and expertise. Yet, someone coming into a position without this industry-related experience might bring a fresh perspective to the business’s legal needs that can be equally valuable to the organization.

The Advancement of In-House Legal Counsel

As the business landscape continues to evolve, the role of in-house legal counsel is increasingly becoming more pivotal. With the proliferation of technology, companies are finding themselves in new territory concerning data usage, intellectual property, and regulatory compliance. In-house counsel will need to adapt quickly to these developments and ensure all business activities are protected by adequate legal structures and strategies.
Further, with the increase in collaboration across business departments, in-house counsel will play a more substantial role in shaping business strategy. No longer just advisors, in-house legal counsel will be involved in strategic decision-making processes, providing insights on risk evaluation based on proposals across the organization. As this trend continues, it will be essential for in-house legal personnel to understand the business intimately and be able to proactively identify potential legal concerns as they arise throughout the growth and development of the company.
Moreover, As companies fight to attract and retain the best talent in the industry , the legal department is likely to face more pressure to create succession plans that will bolster the longevity of the department and the organization. A keen eye on future talent and building a knowledgeable pool of in-house legal counsel will provide long-term assurance and continuity.
Technology will continue to impact e-discovery and case management, reducing costs associated with ongoing litigation and regulatory procedures. Implementing cost-effective technologies will give companies an advantage over leaner competition. Additionally, as artificial intelligence and machine learning have already begun to transform the way legal services are rendered, new features and advancement will shape the role of in-house counsel.
The future of in-house counsel is bright and filled with opportunity. To remain relevant, in-house legal counsel must adapt to the trends that come with these changes. Securing the future of in-house legal counsel will require the development of smart, agile, and supportive legal departments capable of enhancing the value proposition of the organization.