The legal industry is quietly changing the legal employment landscape by adding lateral hires from firms in trouble in a torrid pace. It might be a good business move to take advantage of the times, but you need to look at the whole picture to make the best decisions.
Below are 4 risk management areas of concerns and their solutions for law firms:
1) The money isn’t what it seems. If you hire someone from a failing firm, though they might be a star business generator, it might be later determined that the first year fees must go back to the old firm. Solution for this is: know what you are getting into and only hire for long term as the short term may go back to the old firm.
2) Disputes with the old firm can ruin your success. Cross claims of breach or withholding funds between your lateral and his old firm could tie financially tie him up. Solution here might cost you some money, but might save his focus on bigger issues and you want his head in your game. Come up with some negotiated amount of money that you’ll guarantee the lateral will come away with from the old firm.
3) Mind the Insurance gaps. If he has a claim and the old firm’s insurance policy is no longer in force due to the firm’s collapse and lack of tail coverage, he’ll be distracted and nervous for his financial ruin from professional liability claims from the breakup. Second worst scenario has your insurance covering his past indiscretions; also not a good ideas as you might need your insurance for your own mistakes. Best solution here for you to help him purchase the tail coverage.
4) Your firm gets blamed for contributing to the downfall of the prior firm. This is the least likely but the riskiest as there is no insurance for this risk so you are entirely on the hook.
