Entity regulation, employment and ethics: getting it right

As we move out of all covid-19 restrictions, the legal sector will be turning its collective mind to the return to the office and, at long last, to starting the process of putting in the rear-view mirror an extremely challenging 18 months.

While SRA-regulated practices have fallen casualty to the pandemic, it has been inspiring to watch how the sector has, in general, adapted, survived and thrived under the unforeseen and unprecedented circumstances.

A recent case before the employment tribunal, however, brought into sharp focus the realities and challenges the pandemic has posed not only to firms, but also the impact it has had on individuals working in the sector who have lost their jobs as a result.

The case put in lights the importance of ethical decision-making by employers generally, but the more so in the context of covid-19. It is also a timely reminder of the regulator’s determination to look to entities for accountability where they enable or foster an unethical environment to dictate those decisions.

What was it all about?

The case was brought by a former trainee solicitor, G, against her former employer, N. G claimed N had unlawfully dismissed her in March 2020 for asserting her statutory right to her salary.

N had paid G’s £14,000 per annum salary erratically since G joined the firm in January 2019. By March 2020, this had resulted in G being unable at times to pay even her bus fare, as well as her home internet bills.  

When the firm closed its offices and required G to work from home because of the pandemic, G found herself unable to send documents to her supervisors precisely because she could not pay those bills. The result was she missed a deadline to submit work on 13 March 2020.

Four days after G emailed the firm’s management about the continued shortfall in her pay and asking when she would be paid in full, the firm dismissed her – on the first day of official national lockdown – citing her failure to send the work as a performance issue justifying dismissal and also questioning her attitude, alleging unauthorised periods of leave.

At tribunal, the judge found for G, saying the firm had given a “muddled and contradictory account” of the reasons for dismissal, with the principal reasons for the dismissal in fact being G’s complaint about unpaid wages.

The judge also found the firm had only categorised the leave as being unauthorised after the event. G was awarded over £14,000.

Why does it matter?

This unfortunate case highlights some quintessential points about the nature of the employment relationship, but also some less obvious ones around how those can translate into regulatory issues for firms, albeit that it must be stressed there is no known regulatory aspect to this particular case.

All employers have obligations to follow employment law in their dealings with employees. To an employment law layperson like me, the most basic of these is surely to ensure employees are paid for their work.

Here, it seems, N may have been struggling to meet that basic commitment even before the pandemic hit and certainly before it could realistically have had a significant economic impact. But it is hard to believe that, given the dismissal came on the first day of full national lockdown, there might not have been some prospective mental arithmetic, at least, as to the likely financial implications for the firm of a period of enforced lockdown and difficult decisions that had to be made to mitigate the risks already known to the firm at that point.

If that is indeed the case, N is unlikely to be the only firm to have found itself in that position, whether at the outset of the lockdown or since. Difficult decisions about workforce numbers will have been a regular feature at partnership and management meetings over the last year, but it is the way in which these decisions, with their very real-life human implications, have been handled which is most relevant from the point of view of ethical decision-making and solicitor regulation.

What does it mean for the rest of us?

The Solicitors Regulation Authority’s (SRA) Standards and Regulations put professional ethics and the exercise of professional judgement at the very heart of its regulatory model, recalibrated in November 2019.

What is more, the requirements of ethical decision-making are not limited to individual conduct but apply with equal force to firms and how they are managed. For compliance officers, firm managers and regulatory compliance solicitors alike, the significance of this is that it is no longer enough for firms to conduct themselves lawfully: they must also behave ethically, including in their employment practices.

The employment relationship is a curious one of interdependence at once loaded with human significance and highly emotionally charged. It is by its very nature imbalanced and liable to err into the exploitative.

An employer minded to use these realities to its advantage can readily become an unreasonable or irresponsible employer while still acting lawfully. The implications of these factors for ethical decision-making are clear and magnified all the more under the circumstances of the last 15 months.

What of the SRA?

It is timely, therefore, to have in mind the regulator’s stated position that, where it opens an SRA investigation into professional misconduct allegations, it will be looking at the “culture” of the practice where the alleged misconduct has taken place as a relevant consideration in its own right.

Where those businesses do not properly provide for their employees’ well-being, inculcate toxic environments or demonstrate unethical employment practices, the SRA will look as much to entities as to individuals for answers.

In the case of G v N, an implication of the tribunal’s findings – including that it preferred G’s evidence over N’s on key points – is that it might perhaps have done things better from the regulatory perspective as well as the employment law perspective.

It seems reasonably clear the tribunal found the firm’s evidence on its employment practices unconvincing at best, with the implication that this is because the employer may have been seeking to exploit the situation with the pandemic to dispose of G on an unsustainable premise.

There is no direct suggestion that it found the firm’s evidence misleading, but it was clearly not considered as reliable as other available evidence to it. Were the former the case, the regulatory implications would, of course, have been stark.

And so…

While the success of the sector in navigating a course through the pandemic for the most part intact is a cause for celebration, the human cost for many, like G, cannot and must not be forgotten.

There will likely be numerous other, unreported instances where similar fact patterns have unfolded, making the case a timely reminder not only of the importance of ensuring employment practices are humane and ethical, but also that the cost of the pandemic should not be measured in numbers of firms lost alone.

It should also take account of the aspiring, would-be members of the profession vulnerable to the whims of employer firms fighting for their lives whose careers and career development might have been viewed as collateral and not as a central consideration in pursuing a sustainable practice through the pandemic.

Gideon Habel is a partner and head of Leigh Day’s regulatory and disciplinary team leighday.co.uk