Flexible pool of in-house counsel

Published in Mr. Magazine No. 4
The Dutch Association of In-House Counsel (NGB) recently amended its bylaws to allow in-house counsel without permanent contracts to become members. A guide for the large group of in-house counsel who perform legal work on an on-call basis for multiple companies. As companies seem to place less and less value on the type of employment relationship, the flexible workforce is also becoming increasingly diverse. What qualities must a good interim in-house counsel possess these days, and what type of in-house counsel is most in demand? Mr. delved into the “interim” world and spoke with a number of specialists in the field.

The Dutch Association of Corporate Counsel (NGB) recently amended its bylaws to allow corporate counsel without a permanent contract to become members. This is a guide for the large group of corporate counsel who perform legal work on an on-call basis for multiple companies. As companies seem to place less and less value on the type of employment relationship, the flexible workforce is also becoming increasingly diverse in nature. What qualities must a good interim corporate lawyer possess these days, and what type of corporate lawyer is in highest demand? Mr. delved into the “interim” world and spoke with a number of specialists in the field.
According to Chairman Arnold Brakel, the NGB’s decision certainly did not come out of the blue: due to the ongoing flexibilization of the labor market, the group of self-employed lawyers without staff (ZZP-ers), who generally perform the same work as permanent employees, can no longer be ignored. Brakel: “The CBS estimated the number of ZZP-ers at 1 million as of the end of 2016, 40% of whom are highly educated. At financial institutions, the number of flexible workers currently stands at around 10,000. We recognize that many lawyers work in this way, and we would like to give them access to the NGB and our training programs. The same goes for in-house counsel working at nonprofit organizations, by the way—they have also recently been welcomed.”

Brakel argues that the shift toward a more flexible legal labor market began in the corporate sector and has only recently been rolled out in the legal profession. “Large companies and multinationals have been handling their legal work in a relatively flexible manner for years, for example, by having an in-house legal department, external attorneys for highly specialized areas, and interim in-house counsel to handle peak workloads, such as the implementation of new legislation within an organization. It’s difficult for me to estimate the size of the flexible pool of in-house counsel in the Netherlands, but we can likely expect a significant increase in membership.”

One of those potential new members is Gabrielle de Vries, an employment law attorney who has been working as a self-employed professional for over ten years and, during that time, has worked for companies such as Philips, ASML, and NXP. De Vries certainly considers herself an in-house counsel, partly due to the relatively long duration of her assignments, but she still benefits from the relative freedom of self-employment. “From day one, being self-employed felt really good,” says De Vries. “As an interim professional, I’ve always been able to attract particularly enjoyable and interesting work. I’m involved in extensive employment law issues, ranging from major reorganizations to employee grievance committees and performance workshops for managers. Because I’ve always worked for a few major clients, I build up a case file and become closely involved in the business, but the variety is very enjoyable, and I work from home a lot, which gives me a sense of freedom. As an interim in-house counsel, you’re much more at the heart of legal processes than as an external attorney, and in that sense, you feel more like part of the company. However, the flexible nature of the role also has a downside. Projects always have an end date, and the real policy work is ultimately devised by the permanent employees.”

Moreover, the new Labor Relations Assessment Deregulation Act (DBA) isn’t exactly making things any easier for self-employed individuals. The law, which has since been postponed until 2018, aims to weed out bogus self-employment from the flexible labor market by fining employees and employers with a clearly defined employment relationship. “It’s a ridiculous regulation that many companies are struggling with and that causes a lot of trouble for self-employed individuals,” says De Vries. “In practice, the DBA Act is unenforceable: for example, the hiring period of a self-employed individual is used as a criterion, but what is a reasonable period for hiring an interim corporate lawyer if they are sometimes deployed for years during peak workloads? A great many people like me have consciously chosen self-employment and have no desire whatsoever to become salaried employees. That law is flawed in every way.”

Regien Haarbosch, a consultant at the recruitment and consulting firm Voxius, also notes that the DBA Act has caused unrest in the market. “Companies are suddenly seeing obstacles that may not even exist. The DBA Act is, in fact, little more than stricter enforcement of the rules that were already in place. Companies have been using self-employed contractors for many years, and in some cases, these contractors have indeed ended up in a role similar to that of an employee—including fixed working hours on-site, team meetings, and a Christmas gift basket. Of course, that is not what the tax incentive for self-employed entrepreneurs is intended for. The DBA Act aims to curb (often long-term) interim assignments that are not sufficiently distinct from employment. But now that the hiring client must actually adhere to agreements that have been in place for much longer, the market is becoming constrained, and genuine self-employed individuals are bearing the brunt of it.”

In the Netherlands, the consequences could be disastrous, given that the proportion of flexible legal professionals at the senior level is very high. While the flexible workforce in the legal profession has only emerged in recent years, senior-level interim support has been commonplace in the business world since the mid-1990s. Voxius partner Hielke Bruin: “In the United States and the United Kingdom, you also see flexible workforces, but more at the level of structural paralegal support or in large-scale class action litigation. In the Netherlands, that market is truly mature. We are in contact with approximately 1,000 interim legal professionals, but we primarily work with a much smaller group of 50 to 75 professionals whom we consider truly exceptional. The assessment of good interim professionals is not based on academic credentials—since that is a basic requirement—but primarily on their ability to translate legal theory into practice on the work floor or in the boardroom. Being able to adapt quickly, having the courage to make decisions, and providing advice based on knowledge and experience in similar situations requires a strong personality and—very importantly—the ability to put the importance of Legal into perspective relative to other business processes. They are more like consultants than lawyers. The absolute top tier of interim lawyers in the Netherlands—people you can put in a room with a CEO and who can then brainstorm with a logistics manager—is still relatively small. They’re actually never short of work and often lament that they had more time for vacation when they were salaried employees.”

In recent years, the legal profession has also increasingly moved toward a flexible workforce model. According to Bruin, this has led to an increase in the market for interim in-house counsel, particularly in terms of flexible staffing at both the senior associate and paralegal levels. “In the legal profession, the flexible workforce is successfully used for commodity-like work that is time-consuming but no longer represents real value for the client. In the past, young—but still expensive—staff were assigned to such work, but clients no longer accept being charged regular associate rates for it. Moreover, it is not ideal for this type of work to constitute too large a portion of young associates’ work experience. Large Dutch law firms therefore deploy experienced interim in-house counsel for tasks such as due diligence: high quality at a substantially lower rate.”

According to Regien Haarbosch, this has led to fierce price competition among the broad base of interim corporate lawyers. “Standard interim work is becoming a commodity; it has to be a little cheaper every time, and decisions are often made based on a 5- to 10-euro difference in hourly rates. The administrative agencies that multinationals bring in—for reasons of efficiency and now also for DBA protection—make the hiring process very bureaucratic. In short, the market is undergoing rapid change.”

Luc van Daele, managing partner at corporate legal services firm Legadex, also sees a clear trend toward outsourcing less complex legal work at companies: the barrier to outsourcing work is disappearing. Van Daele: “Companies are increasingly inclined to outsource parts of their legal work to external service providers that offer a flexible workforce.” This trend toward greater flexibility has been underway for some time, and our focus here is not on experienced interim professionals, but on the flexible deployment of junior lawyers and paralegals. The model in which companies maintain a permanent flexible pool of junior lawyers and paralegals with knowledge of the company—a practice originating in the Anglo-Saxon world—is now gaining ground in the Netherlands as well. Outsourcing has long been the norm in other areas of a company, and in that respect, the legal department is simply following the rest of the company.”

Van Daele describes the profile of lawyers in such a flexible workforce as “corporate.” “Everyone wants a proactive person with a fair amount of flexibility and adaptability, and that makes sense, but many lawyers are still too inward-looking. Interestingly, there is an increasing focus on competencies in IT and work processes—something that is rarely, if ever, covered in legal education but is considered increasingly important.”

Bruin of Voxius sees stronger demand at the top of the market for lawyers with an international profile, in line with the cross-border nature of much of the work at large companies. “Companies are looking for Dutch or foreign lawyers who have worked in multiple countries and therefore understand different business cultures. In addition, due to the upcoming European privacy regulations in 2018, there is much more focus on policy implementation. Compliance-related projects are on the rise. Often, this serves as a stepping stone to a permanent position, for which a foundation must be established quickly. This involves not only mitigating business risks but also creating a new corporate ethos. Companies are increasingly seeking to develop their own social DNA, and such projects are being rolled out with the involvement of both in-house and external legal counsel.”

The line between in-house counsel, outside counsel, and interim in-house counsel is thus becoming blurred, as Michiel van Ast also observes. After a career as an IT attorney and in-house counsel, he spent more than six years taking on interim assignments for companies in the telecom and IT sectors. “The distinction between being on staff or not is becoming less and less relevant: it doesn’t matter at all to companies whether you’re on the payroll, a sole proprietor, or a shareholder in a private limited company. What matters is the service you provide; the form is secondary.” According to Van Ast, the umbrella term “interim lawyer” also seems to have had its day. “It dates back to a time when independent lawyers primarily took on full-time assignments—for example, to fill in during a pregnancy. You hop from assignment to assignment, and the trick is, on the one hand, to ensure the assignments flow smoothly and, on the other hand, to find assignments that are a good fit in terms of rate and profile. Of course, such traditional interim assignments are still being carried out, but as the labor market becomes more flexible, all sorts of other forms are emerging—for example, in the form of self-employed lawyers who can be deployed flexibly. The traditional interim lawyer is gradually giving way to the entrepreneurial self-employed lawyer.”

Van Ast himself has since traded his life as a freelancer for his own firm, consisting of three independent legal professionals. “In keeping with the blurring of the lines between in-house counsel and attorneys, we, too, are neither consultants nor interim professionals, but business-minded legal professionals who charge a lower rate than an attorney,” says Van Ast. “The volume of work for entrepreneurial and independent legal professionals is clearly on the rise, and if you’re sharp on the subject matter, specialized, and a bit socially adept, there’s a tremendous amount of rewarding and meaningful work to be done. The benefits for companies are clear. A flexible network of top legal professionals surrounding a compact core is often more efficient and, on balance, less expensive than a broad legal team, including full-time interim staff. Many companies have long since done the math, and I expect this trend toward flexibility to only increase in the coming years.”

Haarbosch, Voxius: “In practice, interim in-house counsel are often overqualified for the assignments in question, because most of them have a senior profile. Although their in-depth expertise may not be strictly necessary for the assignment, it usually turns out that the interim legal counsel can still add value. Companies know that an interim legal counsel may initially seem like an expensive solution, but that temporary hiring is actually more efficient and cost-effective: it’s impractical to encompass all the expertise that might ever be needed in a single profile for one or more permanent FTEs.” Bruin: “Attorneys are traditionally called upon for more academic questions or when executives still want the ‘assurance’ provided by a letterhead from a Zuidass law firm. The competencies required of in-house counsel and attorneys are diverging more and more: the legal function within a company is shifting from a traditional staff department further toward the core business. As a result, the work of interim legal professionals is also becoming more challenging and strategic.”

Gabrielle de Vries has certainly noticed that over the past ten years. “As an employment lawyer, you might help draft a termination letter at the end of a reorganization process. As an in-house counsel—whether in a permanent or interim role—you’re at the heart of the reorganization and can plan in advance how best to structure such a process. You contribute to the big picture and are no longer confined to your own legal silo. That provides an incredible amount of energy and satisfaction.”