Welcome back to the Big Law Business column on the changing legal marketplace written by me, Roy Strom. Today, we look at one of the few Big Law efforts to automate the law. Sign up to receive this column in your Inbox on Thursday mornings.
Kimball Parker isn’t an employment lawyer, and he never gave much consideration to the rules governing the workplace before the pandemic began rewriting them last year. But the CEO of Wilson Sonsini’s automation subsidiary, SixFifty, says he’s overseeing a growth spurt after pivoting to sell employment law products during the pandemic.
Wilson Sonsini, a prominent Silicon Valley-founded law firm, launched SixFifty in 2019, making it one of the few top 100 U.S. firms invested in automating repetitive aspects of the law for clients. Its initial product helped companies respond to a California data privacy law, and pulled in nearly $4 million in revenue during its first six months on the market, I reported for Businessweek in December 2019.
Parker and a team of developers based in Lehi, Utah last year began working with Wilson Sonsini’s employment law group as the pandemic began impacting workplaces. They first rolled out a free Covid-19 questionnaire helping companies track employees’ contact with the virus.
This March, SixFifty began selling a tool that automates the creation of an employee handbook, providing employment policies for all 50 states—at a price ranging from $5,000 to $50,000 depending largely on an employer’s size.
The company says it set records in April and May when new customers grew 70% and 51% month-over-month, respectively. Parker expects 30% growth in June. It’s sold products to about as many customers in the last three months as it did in all its first 18. In total, SixFifty now has nearly 400 customers on a yearly subscription model, with about three-fourths purchasing employment products and the other quarter buying privacy products, Parker said.
SixFifty clients include cloud software provider Domo Inc., solar energy company Vivint Solar Inc., and clothier Vineyard Vines.
Parker declined to disclose specific revenue figures, but he said revenue in 2020 more than doubled from 2019 and he expects the top line to grow by three to four times in 2021.
“When Covid hit we thought to ourselves: How can we be relevant to a company? What are companies really struggling with right now?” Parker said. “And the thing companies have struggled with the most during Covid is employment law.”
While few major law firms have invested in automating aspects of the law, a cluster of the ones that do are focused on labor and employment.
Littler Mendelson, a large labor and employment firm, partnered with software company Neota Logic to launch ComplianceHR in 2015. Its product includes templates to build an employee policy handbook and automated questionnaires that let employers know the answers to legal questions like whether a worker is an independent contractor or an employee.
Ogletree Deakins, another labor and employment firm, markets OD Comply, a software solution that helps companies manage the vagaries of differing state rules regarding marijuana, wage and hour laws, and other issues.
ComplianceHR also grew last year, according to CEO Kimball Norup, though he declined to provide specifics other than to say company has “hundreds” of clients, which include Fortune 50 companies. ComplianceHR did its own pivot to Covid-related products in July, launching a product it dubbed SmartScreen, which, like SixFifty, performed a return-to-work questionnaire.
“This is a way for a law firm like Littler to leverage the IP they’ve developed to a broader set,” said Norup, who was named CEO last month.
One reason behind SixFifty’s recent growth has been partnerships it struck with a nontraditional type of partner, human resources software providers such as Zenefits, Sequoia Consulting, ABD Insurance, and Truyo. About 70% of the SixFifty’s new revenue comes through its partnerships, Parker said.
Most of SixFifty’s customers are small businesses, but about 50 of the companies have a market cap or private valuation over $1 billion, Parker said, and roughly 20 of them are publicly traded. The larger companies, he said, have been interested in the employee handbook product, which some augment with advice from in-house lawyers.
Many law firm tech innovations are designed with an eye toward funneling clients to the firm’s lawyers for more work. But SixFifty views its tool as a standalone product, and Parker said SixFifty does not measure referrals to Wilson Sonsini as a success metric.
“We don’t really see a lot of clients taking our documents and sending them to outside counsel,” Parker said. “We don’t see our service as something that needs to be added onto for most companies.”
This week, SixFifty launched a subscription product packaging its employment law offerings that the company says will be regularly updated with new products—it is working on a 50-state answer for the independent contractor-versus-employee question, for instance. The package costs around $2,000 for small companies and more than $30,000 for larger ones, Parker said.
Selling automated or standardized legal products is an important part of creating a more efficient legal services industry, said Dan Linna, director of law and technology initiatives at Northwestern Pritzker School of Law and McCormick School of Engineering.
“You need to go from bespoke to standardized,” Linna said. “We need to know how to value the things a lawyer does. Did they do it the right way? Are they doing things that the client wants? We’re learning a lot more about that.”
Worth Your Time
On Legal Zoom: Words are the main subject of the law. They are easy to transmit over the internet. Human bodies are the main subject of health care. They are not easy to transmit over the internet. And yet, LegalZoom’s securities filing to sell public shares says approximately 8% of legal services in the U.S. were conducted online in 2020, compared to 30% to 45% of healthcare services. Huh. Why? Lawyers want it that way, LegalZoom says.
From the filing: “Online penetration has lagged in the legal industry due to the incredible complexity of the U.S. legal and regulatory landscape, which makes it difficult for an online platform to gain scale with use cases that are applicable and tailored to each local jurisdiction.”
On the Big Four: Of course, nascent moves are afoot to change that regulatory landscape, and they have caught the eye of the Big Four accounting firms. Sam Skolnik reports a member of the Arizona group that helped advance the state’s rule allowing non-lawyer ownership of law firms has been in touch with a Deloitte executive. But the accountants aren’t firing up new law firms quite yet.
On The XFL: Nobody covers the intersection of lawyers and upstart sports leagues like my Bloomberg Law colleague, Brian Baxter. He was back on the beat this week with a story about Brian Michael Cooper, the Frost Brown Todd partner helping the United States Football League prepare a relaunch next spring. Note to Cooper: If the USFL fails, Baxter will be interested in a post-mortem down the line. You know, like the one he wrote about the Ex-AOL lawyer who tried in vain to save the Arena Football League.
That’s it for this week! Thanks for reading and please send me your thoughts, critiques, and tips.