ABASTRACT The research on law and organizations has experienced multiple phases: law as an incentive for or constraint on organizational compliance, law as an element of the wider institutional environment surrounding organizations, and law the meaning of which is in turn shaped by the proactive practices by the organization. Additionally, an emerging strand of entrepreneurship research has begun to view legislative change as a source of business opportunities. However, few attempts have been made to analyze the relationship between law and organizations combining existing perspectives on law and organizations and on entrepreneurship. In this article, I first examine the positive direct economic impact of law on law firms through providing opportunities for a new legal service since entrepreneurship research suggests that law can influence organizations' structural decisions about whether to practice employment law. Next, I argue that the legal environment also indirectly affects law firms negatively through client organizations. An employee-friendly legal environment makes client organizations more heedful of potential negative consequences and their proactive and careful responses, in turn, alleviate the pressure on law firms to practice employment law. Using a hierarchical logistic regression and controlling for other variables, my findings show that an increase in the number of employment complaints leads to a higher likelihood of law firms practicing employment law. It also reveals that a progressive state legal environment decreases that likelihood. Keywords: Law Firms, Employment Law, Law and Organizations ii