Insight

Remote Controls

How law firms, lawyers and taxing authorities must adapt to remote work

Law Firms Adapt to Remote Work
CO

Cynthia Morgan Ohlenforst

June 7, 2022 08:40 AM

ONCE UPON A TIME—when most people talked about “going to work,” they meant just that. They physically went to work, to a place that wasn’t home or a relative’s or friend’s house or (even better) a lake house or vacation home.

That’s what most lawyers did, including working moms. Law firms and clients expected it, and everything from our work schedules to the taxes we pay have long been based on the premise that most attorneys work in offices outside their homes.

As long ago as 1980, when I graduated from law school, I was convinced that lawyers could work productively without being in the office all day, every day. So, at a time when few women were practicing in traditional law firms, I found a fabulous firm that agreed I could be out of the office on Tuesday and Thursday afternoons. I generally spent that time with my children and got my legal work done at other times. It worked well, and except when I was in trial or closing a deal, I stayed with that schedule from the time I began practice until the year I made partner—without any delay on my partnership path.

The pandemic has confirmed what many of us have known for years: With the right people and the right work environment, much of what we lawyers do can be done from somewhere other than our firm’s office. An April 2021 American Bar Association national survey of more than 4,200 lawyers, “Practicing Law in the Pandemic and Moving Forward,” found that 35% of respondents are thinking significantly more often about working part-time. For women with kids aged five and under, the figure was 53%.

An article in the March 2022 McKinsey Quarterly, “Gone for Now, or Gone for Good? How to Play the New Talent Game and Win Back Workers,” noted that among workers who quit their jobs and then returned to traditional employment, the most frequently cited reason for accepting a job was workplace flexibility. That factor, cited by about 40% of respondents, ranked higher than all other reasons listed, including total compensation and meaningful work.

Law firms have valid interests in this conversation too—not only concerning productivity and quality of work, but also because today’s workforce is infinitely more mobile than its predecessors. Law firms, as businesses, must also pay close attention to the impact frequent travel and remote work could make on their multijurisdictional tax-compliance footprint.

Against this backdrop of what’s happening in the workplace and in the world more broadly, flexible arrangements are critically important to both women and men, especially parents, and flexibility is fast becoming an essential tool for lawyer retention. How do we get there?

Flexibility first. Firms must be agile and flexible. That’s the first point most people make, and it’s a valid one. Many fail to note, though, that lawyers too must be flexible. A must-be-present-to-win mentality won’t suffice in today’s environment, but client work sometimes requires actual physical presence—not only at the courthouse or the negotiating table but also because the benefits of being in the office are significant: in-person brainstorming, building a shared experience and camaraderie, and more effectively providing and receiving training and mentoring.

Policies regarding flexibility should, well, flex. Firms and lawyers must flex not only in their expectations of themselves and each other, but also as they experiment to find what works and what doesn’t. Neither schedules nor policies should be written in stone.

Fixing those troublesome taxes. During the early months of the pandemic, many state and local taxing authorities hit the pause button on collecting taxes from workers who temporarily moved into their jurisdiction and, in some cases, on the companies for which they worked if the businesses didn’t otherwise have tax nexus there. As we all know, though, the pandemic dragged on, and remote working became the norm for many companies, including law firms.

Moreover, some taxing authorities found themselves facing the same financial uncertainties and shortfalls as many taxpayers. In my tax practice, I see an increasing number of jurisdictions that have not only terminated the grace period for temporary tax-free presence but also sought aggressively to collect taxes based on workers’ temporary presence. Addressing these tax issues is a multipronged task:

• Businesses, including law firms, and their workers must be aware of the tax repercussions of remote work in each jurisdiction: What amount of time or work triggers tax exposure? Which taxes? Are the tax repercussions significant enough to avoid hiring or allowing workers in that jurisdiction?

• How can businesses, again including law firms, influence legislators and other policymakers to address tax systems that may subject income to tax in multiple states (e.g., when both the home-office state and the remote-work state seek to tax a worker’s pay)? Which types of state-tax apportionment rules provide adequate means of fairly apportioning such income among the jurisdictions? Over time, both litigation and lobbying efforts will better define the path forward.

We, both firms and individuals, must design workplaces and demand tax structures that encourage and support some degree of remote work for a large segment of practicing lawyers. Doing so can contribute to lawyers’ quality of life and practice. Failing to do so can make it increasingly difficult for law firms to recruit and maintain a diverse workforce.

Cynthia Ohlenforst, a K&L Gates tax partner, chairs the firm’s global Women in the Profession Committee, and has a successful, national practice that encompasses tax planning, litigation and legislative work. She graduated first in her law school class from the SMU Dedman School of Law in 1980 (after having a baby during her 1L year) and, in 2018, the State Bar of Texas selected her as the Outstanding Texas Tax Lawyer. Ohlenforst has been recognized by Best Lawyers® since 2005 in Tax Law, Chambers and Texas Super Lawyers; named among the Top 50 Women in Texas by Super Lawyers; and elected to the American College of Tax Counsel. She has testified before legislative committees in multiple states, litigated in federal and state tax courts, worked on deals with multi-national corporations and actively participated in State Bar of Texas activities, including as Chair of the Bar’s Tax Section. She’s delighted that all three of her children are working moms who, like her, have found professional careers they love.

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