18:35, September 19 341 0 law.com

2017-09-19 18:35:04
Pay for Associate Hours? More Companies Say 'No Thanks'

At a Manhattan conference on legal innovation this month, Mark Smolik, the general counsel of DHL Supply Chain Americas, had a message for the law firm representatives in his audience.

“Sorry, law firms. You spend on the training,” Smolik said. “I cannot afford to pay your associates $325 an hour.”

Instead, Smolik told the group, he’d go straight to the source for young legal talent, and “pick them up right out of law school.”

Smolik is part of a slow-moving but persistent wave of corporate general counsel who are tired of waiting—and paying—for law firms to train lawyers, and are bringing more first-year law school graduates directly into their in-house legal departments.

Smolik added DHL’s first pair of brand-new grads to his 58-lawyer law department almost two years ago. He said such hires are likely to continue at the company.

The shift is driven in part by technology. Law department supervisors no longer need to spend hours each week tracking and recording a newbie lawyer’s workflow. Software can now do that, Smolik said.

“It gives more visibility,” he said.

First-year graduates are able to handle routine employment-related matters that an outside law firm might have previously been assigned, Smolik said. He expects the straight-out-of-school set will soon be able to handle garden-variety real estate matters, such as leases, too.

DHL isn’t the first company to hire in-house lawyers straight from law school. Others—including Exxon Mobil and Procter & Gamble—historically have hired first-year graduates. But more GCs now are either joining the trend or considering it, said William Henderson, a professor at Maurer School of Law at Indiana University in Bloomington. Henderson teaches a course called The Legal Profession, and works closely with firms and in-house counsel on developing new career paths for law graduates.

“I’m not in a position to give hard numbers, but a lot of legal departments have expressed an interest in hiring right out of law schools. This is particularly true of law departments that are large or ones that deploy teams of legal professionals,” Henderson said.

The law department leaders from Cisco, Adobe and other high-tech companies have been on panels with him discussing alternatives to spending money on outside firms’ associate hours, Henderson said. One GC even said that third- and fourth-year associates who had been trained at law firms were “of no use,” he said.

Will in-house hiring eventually dent the Big Law early career pipeline? “It’s not a defined career path yet, but there is a strong interest,” Henderson said.

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