Share Space, Not Risk: 3 Ways to Avoid Liability in a Shared Office
For a solo attorney or small firm, a shared office space can provide the benefits of a larger practice, without the cost of setting up shop all on your own. A nice conference room and some shared staff can really beat working off a laptop in your kitchen.
But off course, with any benefit, there are also risks. Office sharing can also impose unique liability risks for attorneys, something any office sharer should be aware of before their shared office becomes a shared liability.
Confidentiality and Conflicts of Interest
One of the major concerns when sharing an office should be client confidentiality and potential conflicts of interest. Client files and records should be kept separate and away from common areas or shared employees. Avoid paper-thin walls -- make sure that meetings and calls with clients can't be overheard by officemates. If the shared office includes shared personnel, their training should include how to keep mattes separate and confidential.
Shared staff also can raise a risk that there will be a conflict of interest; that the legal assistant or office secretary may be asked to work on two matters where the parties, represented by both office sharers, have adverse interests. The best way to avoid this is to do what firms often do -- to institute formal procedures for checking on conflicts between practices.
Partnership by Estoppel
Under the theory of partnership by estoppel, parties may be held liable to third parties as if they were partners, even though there was no agreement or actual partnership. Partnership by estoppel may arise when one office sharer holds the other out as a partner. Factors that may contribute to a finding of partnership by estoppel, according to a review of cases and ethics opinions by the Los Angeles County Bar Association, include an office's physical arrangements, shared staff and fee systems.
What can turn a shared office into a partnership by estoppel? An office where there are few physical barriers between practices, where you share record keeping space, phone systems, conference rooms and the like, is more likely to be seen as being held out as a single practice. The same goes for shared staff, where secretaries and assistants serve all office users. Additionally, how the costs of having the office are divided can influence whether a court finds that it was being held out as a single practice. No one factor is dispositive, however.
Impermissible Referrals
Most states have restrictions on how and when clients may be referred to lawyers. In a shared office space, take steps to avoid giving the impression that you are impermissibly referring clients from one business to another. This is particularly important when the space is shared with a non-legal business that could be seen as feeding clients to the law practice.
While sharing is an obvious cost savings, do be aware of the challenges that come with it, especially if you share with non-lawyers who are not as sensitive to the ethical considerations lawyers live with every day.
Related Resources:
- Sharing Space (ABA's Law Practice Magazine)
- 3 Mistakes Lawyers Make When Choosing Office Space (FindLaw's Strategist)
- 5 Problems Unique to Work-From-Home Solos (With Solutions!) (FindLaw's Strategist)
- Mirkarimi Lesson: Attorney-Client Privilege Covers Non-Attorneys (FindLaw's California Case Law)