A law firm is also a form of business, and is hence subject to federal laws or clauses which pertain to businesses in general. However, expansion is another matter, because certain states have specific regulations or perhaps even different federal considerations as to this. In other words, law firms may face difficulty, i. e. in hiring personnel who are willing to become residents in a foreign state, as per regulations of that particular state, like in China.
China’s regulations on foreign law firms stipulate that representatives of a foreign office must be residents of the country for 6 months each year, and failure to comply means a forfeiting of that representative’s registration in the succeeding year, as in Chapter 3, Article 19 of Regulations on Administration of Foreign Law Firms’ Representative Offices in China (china. org. cn, 2001). This presents an example of a possible drawback in the arena of employment.
Other drawbacks concern the expansion methods used; whereas direct recruitment from the law school pool is still being used, expansions of law firms have also been making use of affiliations and mergers (Daniels, 2008) for synergy and, of course, diversification. Regulatory considerations are said to be classified as general—regulations that affect all firms, or industry-specific—regulations that are applied or considered for specific firms or transactions.
Included in general considerations are federal security, antitrust, environment, racketeering and employee benefits laws. Industry-specific regulations are applied to industries such as public utilities, transportation, banking, and defense contracting, among others. These industries may then be required of government approval, transfer government-granted licenses, franchises and permits (DePamphilis, 2005). In short, a number of regulations exist at the state level that may not necessarily be in the federal laws, making compliance a complicated feat.
Another drawback is communications. Although the internet and recent developments in technologies permit easier contact with out-of-state operations, certain states have regulations on the monitoring of the communications of employees. Some companies are free to filter employee communications, but certain states have broader or stricter restrictions that may even go as far as disallowing the filtering of emails (Matthies Law Firm, 2004).
Daniels, R. J. (1993). Growing Pains: the Why and How of Law Firm Expansion. The University of Toronto Law Journal, 43(2), pp. 147-206. Matthies Law Firm. (2004). Summary of Employment Laws of the US Federal Government. Retrieved 25 September 2008, from http://members. aol. com/mattlawfrm/fedlaw. htm China. org. cn. (2002, January 1). Regulations on Administration of Foreign Law Firms’ Representative Offices in China. Retrieved 25 September 2008 from, http://www. china. org. cn/english/DAT/214778. htm De Pamphilis, D. (2005). Mergers, Acquisitions, and Other Restructuring Activities. New York: Academic Press.