July 21, 2024

6 in-house legal trends to watch in 2023

6 in-house legal trends to watch in 2023

Faced with pressure to do more with less as economic uncertainty continues, in-house legal department leaders will likely find themselves under the gun this year. 

“Many legal chiefs are experiencing the most turbulent period of their entire careers,” Sophie Ross, the global CEO of FTI Technology, has said.  

The turbulence is driving what are likely to be the biggest in-house legal trends this year: More reliance on legal operations staff and on the use of technology, particularly technology powered by artificial intelligence, and a redoubled effort to seek accommodation from law firms on fees.  

“Corporate law departments continue to face the brunt of pressure points involving cost control and increasing workloads,” say analysts at the Thomson Reuters Institute and the Legal Value Network.

Against this backdrop is a stepped-up compliance picture, particularly in data privacy. Following California with its landmark consumer privacy law, which takes full effect this year, states across the country are enacting their own laws to regulate how companies operate online. And this could also be the year the federal government gets involved: last year Congress came close to enacting the American Data and Privacy Protection Act. 

Another compliance area that is expected to command a lot of in-house attention are wage transparency and other employment-related laws. Several states, including New York, have enacted laws requiring employers to give a pay range when soliciting applications for jobs. Cities are doing it, too. Expect more to follow suit. 

Meanwhile, the economic uncertainty is changing the mergers and acquisitions calculus, heightening the legal department’s role as more deals end in fights.

To help you get a picture of what the year holds, here’s Legal Dive’s take on some of the top in-house legal trends of 2023 that could shape your department’s operations. 

Legal fees

Law firms have said they want to raise fees 7% to 8% this year, a Wells Fargo report says, but that goal flies in the face of pressure in-house law departments are under to cut costs.

Outside legal work is the highest cost faced by law departments by far, and it’s also the most unpredictable. Almost every legal chief in a Coleman Parkes survey said their legal bills are regularly higher than they expect, and 40% said they’re higher every single time they come in.

To bring those costs down, more departments are seeking alternative fee arrangements, but finding mixed success.

About 60% of law departments in big companies have been able to negotiate some kind of arrangement other than hourly billing, but only about 30% of smaller departments have been able to do that, according to a survey by the Association of Corporate Counsel and Major, Lindsey & Africa. Retainers and the use of blended rates are the arrangements getting the highest increase in use. 

To help move the needle on these efforts and to more generally increase their department’s operational efficiency, legal leaders are expected to turn more to legal operations specialists. About 60% of legal departments have at least one legal ops specialist today, up from something closer to 45% a few years earlier, an ACC survey finds

One way the legal ops function helps lower outside counsel costs is by enforcing billing discipline. That means rejecting fees that don’t follow the department’s billing guidelines, pushing for voluntary invoice reductions and turning to a competitive bidding process to light a fire under outside firms’ feet. 

Legal operations

Most legal operations teams have between one and four individuals, but many have been growing in size and influence in recent years.

Given the current economic environment, legal ops teams in 2023 are likely to be even more closely consulted by legal department leaders seeking to achieve greater efficiency.

“The logical evolution of the legal ops function is that it becomes the general counsel’s right hand,” said Kevin Cohn, chief customer officer at Brightflag.

Mike Haven, president of the Corporate Legal Operations Consortium, recently told Legal Dive that one way legal operators can support law department leadership in tight economic times is by helping to implement process automation.

In a similar vein, experts predict legal operators will be increasingly called upon to lead legal departments technology adoption initiatives.