What you really want to know is, “Can I make a profit by billing out a contract attorney to my client at a higher rate than I am paying the contract attorney?”

The answer, basically, is yes. In a 1993 Formal Opinion, the American Bar Association’s Standing Committee on Ethics and Professional Responsibility reasoned that since contract attorneys provide legal services, which are the very type of service law firms were established to provide in the first place, law firms should be able to realize a profit on their use of contract attorneys. So, while you cannot mark up the cost of, say, photocopies or court reporter fees, you can mark up the cost of a freelance or contract attorney so long as the final fee charged to your client remains “reasonable”. In this respect, it is similar to billing for an associate’s or paralegal’s time. Because you must certify or “sign off” on any pleadings as your own, you must review the work product of your freelance attorney. This is why a surcharge is appropriate.

Some states limit how you can describe the contract attorney to your clients. For example, the Committee on Professional and Judicial Ethics of the Association of the Bar of the City of New York stated that a firm may not refer to a contract attorney as an “associate” for billing. The New York Bar did not require firms to inform clients that they were using contract attorneys, nor did it address the rates at which law firms could or should bill contract attorneys.

The use of contract attorneys can benefit law firms, their clients, and, of course, freelance contract attorneys. Indeed, in August 2008 the ABA issued Op. 08-451 praising the use of contract attorneys. The Opinion explains how the use of contract attorneys actually increases the quality of services provided by some small firms to its clients:

“A small firm might not regularly employ the lawyers and legal assistants required to handle a large, discovery-intensive litigation effectively. Outsourcing, however, can enable that firm to represent a client in such a matter effectively and efficiently, by engaging additional lawyers to conduct depositions or to review and analyze documents, together with a temporary staff of legal assistants to provide infrastructural support.”

However, just because you can mark up a freelancer’s hourly rate doesn’t mean you should mark it up to your own hourly rate. The flexibility should ultimately benefit your clients. This means that, if your client is on a budget, you can pass off a freelancer’s work at a straight cost or with only a moderate surcharge, and still deliver excellent work to them on your busy schedule.