Regulating firms' corporate culture

On 7 February 2022, the Solicitors Regulation Authority (SRA) published its long-awaited Guidance on Workplace Environments, setting out (1) what it considers a good workplace culture looks like; and (2) the circumstances in which it will take action against firms, where the failure to cultivate the right culture plays a role in or contributes to individual misconduct.

Background

For some time, there has been growing disquiet in the legal profession about the SRA’s treatment of junior solicitors who commit acts of dishonesty, usually to conceal or cover up mistakes. Despite complaining of toxic and unsupportive work environments, unreasonable workloads, and inadequate supervision, those solicitors have, in most cases, lost their livelihoods, while the firms have escaped sanction. The SRA have been accused of going after the ‘low hanging fruit’ of junior solicitors, rather than attempting to address the more complex and thorny issue of workplace culture.

The guidance

The guidance arises in that context. It is a substantial piece of work, comprising of the guidance itself, a thematic review and accompanying case studies. It makes clear that the SRA is likely to take action against firms where there is evidence of failures to:

• investigate abuses of authority by senior staff;
• deal promptly and fairly with complaints of discrimination, victimisation or harassment; and
• supervise junior solicitors or support staff, leading to serious competence or performance issues.

The guidance emphasises the need for firms to focus on the following issues:

• Well-being: the guidance acknowledges the pressures and stresses involved in working in firms – and does not prescribe solicitors’ working hours or the practices and procedures that firms should adopt. However, firms should have in place mechanisms for monitoring staff well-being, provide access to psychological support or counselling services, and create a culture whereby individuals feel comfortable to report any mental health concerns or stresses associated with work.
• Creating a ‘speak-up culture’: when individuals do not consider that they will be supported, they are less likely to admit to mistakes and more likely to try and conceal them. Firms should strive to install a ‘no blame’ culture, looking at mistakes holistically and constructively. Similarly, firms should establish clear reporting channels to encourage the disclosure of unwanted conduct and harassment.
• Effective supervision and competence: the guidance emphasises that effective supervision extends beyond the supervision of client matters, and includes assessing workloads and capacity, and identifying any relevant training requirements.

What firms need to do

In practice, determining whether a firm has a bad culture is unlikely to be as straightforward as determining whether an individual has committed a rule breach. Much will depend on how willing the SRA are to enforce the guidance, and it will take time for a body of Solicitors Disciplinary Tribunal decisions, Agreed Outcomes and Regulatory Settlement Agreements to provide greater clarity as to the circumstances in which rule breaches will be investigated by the SRA and/or established by the Tribunal.

However, firms should be considering the guidance carefully, with a particular emphasis on the following:

• Leadership: a key theme emerging from the guidance is the role senior individuals play in cultivating firm culture. Senior individuals should set the standard, be it in their interactions with colleagues, or through encouraging others to ‘speak up’ when mistakes are made, through giving examples of their own experiences.
• Complaints handling: it will be increasingly important for firms to be able to demonstrate that complaints made by staff are properly investigated. If complaints about an individual are ignored or trivialised, and that individual’s conduct escalates, a firm regulatory breach is very likely to be established.
• Policies: firms will need to consider whether their policies, systems and working practices (or the lack of such policies and practices) increase the risk of individual misconduct.

Conclusion

The benefits to firms in cultivating the right culture are obvious. A supportive environment leads to a happier workforce, higher rates of retention (a particular consideration in this current legal market), reduced staff absences due to stress and/or sickness, and a lower risk of negligence claims. The threat of regulatory action should not be considered as a burden and, instead, should be viewed as a further reason why firms need to be concentrating on this issue.

Andrew Pavlovic is regulatory law partner with CM Murray LLP: cm-murray.com

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