Legal service plans grow popular during the recession

BY PHILLIP ERNEST
August 10, 2009
Fort Worth and Texas small businesses are ahead of those in many other U.S. markets – with 2 percent growth in employer firms in Texas compared to a 2 percent drop nationwide – yet the effects of the recession are indicated by the 7.5 percent unemployment rate in June, the highest in more than 16 years, according to the Texas Workforce Commission.
As a result, here in Fort Worth, as elsewhere, small business owners are being forced to focus on their operations as never before. Everything must be evaluated in terms of need, cost and return on investment.
Currently, the national news media is saturated with stories about the proposed national health care reform and, to a lesser extent, the latest minimum wage increase. Both issues are of importance to small business owners and their employees. Another that should be on the radar screen of business owners and their employees is legal service plans, or pre-paid legal services.
The reason is simple: in a time of economic volatility, small business owners are more likely to need access to legal services – both for proactive purposes, such as creditor debt collection, and for preventative purposes, such as lawsuit defense. Ironically, this is the time small business can least afford the high cost of “hourly fee” or “flat” fee services of most corporate law firms.
Pre-paid legal service plans benefit the small business in two distinct ways. First, from an operational perspective, there are a variety of plans that can be tailored to the needs of the business owner for a fixed monthly rate. These plans include a suite of legal services, such as: legal consultation, legal correspondence, contract and business document review and trial defense services – provided by attorneys from a provider law firm with local market experience.
Secondly, legal service plans can be incorporated into the company’s human resource benefits package for employees. As a group plan, this can be offered as a voluntary benefit, managed through payroll deduction. Participating employees gain access to legal services and consultation on a variety of personal issues, such as buying a home, divorce and creditor disputes. The Society of Human Resource Managers has reported that legal service plans are a valued human resource benefit and one of the fastest growing voluntary benefits in recent years.
In addition to cost control, legal service plans offer business owners’ access to timely and accurate information. Being able to contact a specialist in a specific area of business or tax law is not something many business owners would do, yet the peace of mind in knowing the right decision was made and action taken, based on expert knowledge cannot be overstated.
The specific legal services that small business owners’ use tends to morph to the need of the moment. For example, one small business owner has a customer who comes in once each month with a revision to the existing business contract. This small business owner uses the legal service plan to have an attorney with the provider law firm examine that document for any changes that might impact his business. Rather than paying an independent attorney $250 to $300 for that specific service, he pays less than $100 monthly (and still has access to a multitude of other legal services). Another company, a construction firm, operates in several states. Doing business in multiple states required multiple law firms (and separate billing) from each. By choosing a legal service plan with nationwide coverage, this small business owner was able to save thousands of dollars each year. Still, other firms find the collection letter service (up to 10 letters per month) invaluable. When “nudging” is not enough, a letter on law firm stationery has a way of generating attention.
Some legal service plan providers offer additional services to complement the needs of small business owners and employee groups. The use of legal service plans in small business continues to grow as the owners and their employees recognize the benefits and cost-savings these plans offer. Perhaps the current recession has served as a catalyst or tipping point toward a new direction in the delivery of legal services.
Phillip Ernest is an independent associate with Pre-Paid Legal
Services Inc.