Well trained

The growing number of law firms withdrawing training contracts offered to future trainees is a relatively new problem that has led to a host of new legal and regulatory issues. In the past, offers for training contracts would be honoured and it was unheard of for them to be withdrawn. Nevertheless, because of the economic downturn firms are pulling the rug from under their ambitious new recruits and are leaving themselves open to a multitude of employment law traps unless they conduct themselves carefully.

The Training Trainee Solicitors SRA Requirements provide that a training contract can only be cancelled by the mutual agreement of both the trainee and the firm, an application to the SRA by either the trainee or the firm, or a cancellation clause, whereby the training contract is conditional upon the trainee passing the general diploma in law or the legal practice course.

The SRA dictates that its standard training contract must be signed by the firm and the trainee and registered with the SRA within three months of the trainee commencing their training. This acts as the SRA's record of the training contract and, before the regulator receives it, it has no jurisdiction over the relationship between the two parties.

So, if a training contract is withdrawn before its commencement date, the firm can act unilaterally in the termination of a training contract before it has begun without the involvement of the SRA.

This does not mean, however, that firms can withdraw training contracts without fear of any repercussions. Firms need to be alive to the employment law issues arising from the withdrawals, for which claims can still be pursued in the employment tribunal or the county court.

Most firms will offer a supplementary contract to the trainee prior to signing the SRA's training contract giving details of salary, holidays etc., and this records the trainee's acceptance of the training contract. This should include details of the trainee's notice period. In the absence of a specified notice period within the supplementary contract, the value of the breach of contract claim upon the withdrawal of the training contract could amount to the full value of the duration of the fixed term training contract. There is also the potential argument that the trainee could claim for loss of future employment prospects as successful completion of the training contract enables qualification as a solicitor, and this could potentially be an extremely sizable claim.

Avoiding risk

To avoid the risk of a claim, firms may opt to simply pay trainees the value of their notice period upon withdrawal of the training contract to avoid a claim and potentially reduce the adverse effects on the firm's reputation. Negative publicity may already be surrounding the firm if training contract offers are being withdrawn, and this would be aggravated if successful employment tribunal claims followed.

There can be no recourse for the trainee for unfair dismissal in these circumstances. To successfully bring a claim for unfair dismissal, the trainee would have to be an employee with in excess of one year's service (except in very limited circumstances).

Firms need to be careful when deciding to withdraw training contracts that the selection criteria are non-discriminatory. For example, firms that offer a number of training contracts per year may need some trainees to start work, but will not need all the trainees who have been offered training contracts. In these circumstances, firms need to ensure that the trainees who have been selected to have their contracts withdrawn have been done so on non-discriminatory terms, i.e. terms that cannot be seen to constitute sex or race discrimination etc. If a prospective trainee was successful in bringing a claim for discrimination in the employment tribunal, the firm could be liable to pay up to £25,000 for injury to feelings, as well as unlimited compensation for pecuniary loss. This could of course equate to the full value of the duration of the training contract.

To avoid any suggestion of discrimination, firms may wish to write to all trainees who have been offered training contracts inviting them to withdraw. This could potentially cause difficulties if all trainees withdrew when the firm still required some trainees to commence work, but, given the level of demand for training contracts, this is unlikely. Assuming that the requisite number of trainees did not withdraw, firms could consider simply pulling names out of a hat, or using other non-discriminatory criteria.

Although it is fast becoming a fact of life for law graduates that their training contract offers aren't necessarily guaranteed, firms need to consider carefully the steps they take when withdrawing the contracts. Although there are no SRA requirements to follow, trainees will still have the option to issue a claim for breach of contract. If firms choose to cancel only some of the training contracts that they originally offered, they must ensure that this is done in a fair, non-discriminatory manner to avoid a backlash of discrimination claims that could do irreparable damage to their reputation.