C.E.Oh No. Titles Firms Should Avoid

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Attorneys, architects, accountants, engineers, insurance brokers and agents are all business-persons. Some of these professionals balance their professional obligations on the one hand with business obligations on the other. Pay bills, manage staff, execute leases, develop operational strategy. For some professionals overwhelmed by the business side of running a professional organization, an option is to rely upon laypersons for help. Indeed, it is not uncommon for firms to hire individuals to head up operations, some who may be designated with prestigious titles: CEO or COO. But as fitting as these titles are in the corporate world, these designations may be problematic for law firms.

Texas’s ethics commission recently issued an opinion forbidding the use of certain commonly used business titles given to managerial staff within a law firm. In Opinion 642 the commission concluded that Texas law firms cannot use titles such as Chief Operating Officer or Chief Technology Officer for non-lawyer managers. Specifically, the opinion takes issue with the use of the words “officer” and “principal” finding that these words indicate that the person has the power to control the firm and implies ownership. Because Texas’ ethical rules do not allow non-lawyers to direct or control the opinions of lawyers, and these titles suggests otherwise, the firms are communicating in an untruthful way according to the opinion.

The opinion also takes issue with bonuses to non-lawyers based on the firm’s profit targets. The opinion concludes that this type of profit-driven bonuses to non-lawyers is impermissible because there is an ethical ban on sharing legal fees with a non-lawyer. The opinion states that such a bonus plan would interfere with a lawyer’s independent judgment because it would encourage non-lawyers to undertake efforts to increase revenue such as soliciting clients or reducing expenses.

This opinion raises two interesting, often overlooked issues facing laypersons employed by professional organizations. Accordingly, all firms should reevaluate their organizational structure and business model to ensure that both comply with the local rules in light of this recent opinion.