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Changing opinions on unauthorized practice of law

August 11, 2014

Last month a member of the Professional Conduct Committee of the New Jersey Society of Certified Public Accountants wrote to me to express concern that my work associated with a library of online employee benefit forms might violate the state’s tough new law against unauthorized practice of law. Until that time I presumed that a practice of employee benefits field was wholly regulated by the federal government under the well-established preemption of ERISA law. In general, this law and IRS Circular 230 make it clear that a CPA is authorized to practice before the IRS and it makes no distinctions for varying state laws.

I took the issue seriously. A violation of the New Jersey statute NJ Rev Stat § 2C:21-22 is no longer a disorderly persons charge but a third degree or fourth degree criminal offense. I attempted to hire two different New Jersey law firms to offer an opinion. Each declined the request after reviewing the information I provided. One lawyer wrote “I’d be a little scared of relying on a federal preemption argument, just because in addition to ERISA there are some state laws that can bear on retirement accounts, inasmuch as each state has its own Banking and Insurance regulatory regime.” The second also expressed uneasiness with reliance on federal law.  That made me even more nervous.

After reviewing all the information readily available (although I am aware that there exists some relevant published information I have been unable to locate) I conclude that I am not at risk of violating New Jersey’s statute and that I am unlikely to face a complaint about unauthorized practice of law in any state.

Background

I started working on customized employee benefit plan documents in the 1980s when I worked for a pension firm that was a subsidiary of and operated in physical connection with a Philadelphia law firm. After I left the firm I began to collect various prototype employee benefit plan documents that might be of interest to the practice of small business employee benefits. My activity accelerated up while taking compensation planning curriculum at Villanova Law School (the MT was open to non-lawyers). Over several decades the collection grew to what I believe may be the largest of its type with hundreds of documents and variations.

These documents were used in both academic and commercial settings as concrete examples of the theories of employee benefits practice. Academic settings included a series of classroom-based Continuing Professional Education courses that my sole practitioner firm offered in Doylestown and Narberth for attorneys, accountants and insurance agents authorized respectively by the Pennsylvania Bar Association, the Pennsylvania Institute of Certified Public Accountants and the Pennsylvania Insurance Department.

In the mid 1990s my practice transitioned to an online platform, so these documents were offered free of charge in all 50 states and D.C. When operating in private practice I was careful to disclose that: a) I was not selling the documents as part of my service, 2) I am not an attorney, 3) I am not able to offer advice as to the suitability of any document for a specific purpose, and 4) an attorney should be consulted for advice on any legal document. Typically this disclosure was part of my terms of service agreement and was repeated in an email to the client at the time of delivery of service. Yet I was aware that many or most clients simply grabbed the documents and filled in the blanks without consulting an attorney.

New Jersey jurisdiction became an issue when I established a residence in New Jersey with a home office that serves as my business address.

For more than two decades I offered the documents, without charge and without assurance of suitability, to almost anyone who asked. I considered it to be a public relations strategy for my practice, and as such, might have derived some benefit as described by the laws pertaining to unauthorized practice. Also, the the extent the documents were offered to a paying client, I amaware that the lines I drew between charged services and free services might not hold up if challenged.

 Then in June of 2014 I restricted access to the online document library in response to my concerns that some practitioners were improperly using the documents to evade the provisions of the Affordable Care Act. My action was unrelated to this question about unauthorized practice of law.

Analysis of  New Jersey law

Michael Gould prepared an article “Practicing Law Without a License?” reviewing the revised law on unauthorized practice specifically for New Jersey CPAs in 2011 that does not address employee benefits practice. Mr. Gould explains that  NJ Committee on Unauthorized  Practice Opinion 22 (June 13, 2011) reinforces the sole domain of attorneys in preparing legal documents but recognizes some area of leniency for CPAs preparing formation documents.

The NJ law incorporates an exception for employee benefits practice but I was unable to review all published information and opinions. Specifically, I did not review  the original authority: NJ Committee on Unauthorized  Practice Opinion 22 (Mar. 22, 1979) or Chapter 39 of Michels, New Jersey Attorney Ethics (Gann 2013) that is described as an excellent source regarding the ERISA exception.

It is clear that the recent action to toughen up” the NJ law is meant in response to abuses by individuals in the immigration field, not specifically meant for accountants with an online employee benefits practice.

The model complaint published by the NJ Judiciary makes it clear that the punishment is meant for those who knowingly violate the law. Clearly I’ve demonstrated that I am not aware of a violation of the law and have taken reasonable if not extensive action to avoid knowingly violating the law.

Other legal commentary

A particularly useful opinion published in North Carolina supports the ERISA preemption over state law in a case specifically involving the unauthorized practice of law. This reference, dated June 22, 2014 by the North Carolina State Bar Authorized Practice Committee Pension Plan Subcommittee, was most influential in supporting my conclusion.

This 2010 comment in Americanbar.org, although now outdated, shows the beginnings of the shift in sentiment within the legal community.

The most often cited cases in the area of online self-serve legal forms involve LegalZoom. LegalZoom faced charges of unauthorized practice of law in eight states and settled three of the earlier charges. Lately it is fighting back and winning. The tide has clearly changed for LegalZoom and it is now claiming victory for its business model as described in this month’s issue (August 2014) of the American Bar Association Journal.

Changing public opinion

It is clear that public sentiment has shifted with regard to do-it-yourself legal forms. A reading of published comments makes it clear that the public is done with the atmosphere of legal protectionism. The typical published consumer attitude is expressed in this sample comment: “The idea that document automation software is the practice of law is just another attempt by the organized bar in some states to protect lawyers’ income in the name of protection of the public interest. Instead of figuring out how to deliver to consumers the value that they want around common legal actions, the organized bar persists in fighting a rear-guard action to preserve its monopoly of the delivery of legal services”. The same shift in attitude is reflected within the legal community.

This recent (2014) article in Fordam Legal Review titled “The Legal Profession’s Monopoly: Failing To Protect Consumers” details today’s prevailing opinion within the legal community.

Author’s note: I welcome any additional input, especially contrary opinion, into the question originally posed: “Am I at risk of violating unauthorized practice of law statutes?” As it stands now, I think that it is not a significant risk. If any readers have access to the two NJ citations mentioned but not read, I would greatly appreciate a copy.

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