The problem

In Australia, law graduates are required to either complete a supervised workplace training program (generally with a law firm or an in-house legal department), or a practical legal training program offered by an accredited educational institution in order to become admitted to practise law, i.e. It’s the next major step after graduation to qualify as a lawyer.  Supervised workplace trainees are paid a graduate salary, whilst practical legal training trainees pay around $10,000.00 in course fees, though there are also hybrid arrangements. Once admitted, new lawyers, particularly those who completed a practical legal training program and therefore may not have accumulated significant experience with a potential employer, face the challenge of seeking supervised employment. A newly admitted lawyer must be supervised for two years as a condition of their restricted practising certificate.

It is well-known that there is an oversupply of law graduates and new lawyers in metropolitan Australia, significantly increasing the competition when it comes to supervised workplace training programs and subsequently, first-year positions. It has been estimated that Australia is producing 12,000 law graduates a year, however there are only 60,000 working lawyers in the country. Of course, this includes students studying double degrees and post graduate degrees etc. who may not necessarily have ambitions to pursue careers as lawyers; however the number still leaves me incredulous.

I experienced this competitive environment myself during practical legal training in 2013; the proportion of trainees that had secured legal roles was definitely outweighed by the proportion that hadn’t. It is indeed a catch 22. Most positions advertised sought a lawyer with 2-3 years post admission experience yet graduates couldn’t get their foot in the door to rack up the same. Even now at the current firm that I work at, I was told that there were over 300 applicants for 1 supervised workplace training position. First year lawyer positions are even more of a rarity. Clearly, it is a buyer’s market and the firms have all the bargaining power when it comes to having graduates and new lawyers jumping through hoops and being able to select those who are perceived as being the cream of the crop.

A controversial ‘solution’

With this in mind environment in mind, I was amused however not surprised when I came across this article about a new Adelaide based firm, Adlawgroup, proposing to charge newly admitted lawyers $22,000.00 for a two-year “employment and mentoring program“. The $22,000.00 payment is said to cover the cost of education programs and the cost of a supervised practising certificate for the 2 years. In turn, a new lawyer will, as the firm puts it “derive his or her income through fees earned”. Whether this is through a salary, a percentage of their billings or something altogether different remains to be seen.

So I’ll be optimistic and break this down in the case of an annual salary, since the Adlawgroup website has not held back on using the term ‘employee’ and ‘employment’ to describe the arrangement. Furthermore, ‘supervised practise’ in South Australia means practise as an employed practitioner controlled or managed by a legal practitioner. Law graduates earn around $53,000.00 per annum on average, however in the traditional employment model, the law firm is covering lawyer’s expenses such as a practising certificate, insurance and CPD. Assuming that Adlawgroup pays an average annual wage (which I doubt but stand to be corrected about), this means that new lawyers would actually be earning an income of $42,000.00 per annum before tax. If the assumption is that Adlawgroup pays the national minimum wage of $33,326.00 per annum rather than the average law graduate salary, new lawyers would be earning somewhere around $22,326.00 per annum having accounted for the $22,000.00 payment, divided over 2 years.

As for justifying the $22,000.00 payment? Adlawgroup states that this fee “includes the cost of the practicing certificate and the comprehensive continuing education program”. The fee for an annual practising certificate in South Australia is around $585.00.  All lawyers holding practising certificates must complete 10 units of Continuing Professional Development per year. Let’s be extremely generous and say that each unit of CPD costs $300.00.  Having accounted for the practising certificate and CPD costs, this is still only $3,585.00 per year.  Allowing a buffer for insurance premiums and other incidentals, the firm would still be profiting at least $10,000.00 on each recruit, in addition to receiving revenue generated from billings (if and when that happens).

Warning signs

The cynic in me is speculating whether the salary will be actually lower than the average law graduate salary, or worse, based on a commission structure of fees actually earned by the new lawyer (though I’d be interested to see the legalities of this).  After all, this is a business model primarily targeted at new lawyers rather than clients. Their mission as described in their “Getting Started PDF” is to “become a thriving hothouse for new legal talent in South Australia” whilst most law firms’ missions are aimed towards the service they actually provide clients. Even more ominous, at the time of writing this post:

• there are no areas on the website actually trying to pitch legal services to clients;
• there are no profiles of the supervising lawyers; and
• a sample check of their 900+ twitter followers indicate that a substantial proportion are paid and/or fake.

Will new lawyers embrace this concept and sign up?

It comes down to many factors, including the opportunity cost of participating in the program (i.e. alternative employment or income earning options), how passionately one feels about practising law and the job prospects available to a participant once they complete the program. It took me over a year between qualifying and actually securing a private practise position, however I was earning a decent salary in a different field.  There was no way that I would have signed up for this option to be paid approximately between $22,000.00 and $42,000.00 per annum before tax.

Add to this, the fact that the firm is neither reputable nor established and already recruiting for 10-15 new lawyers to take part in the program. I would question whether there would be enough legal work to provide meaningful experience to the first tranche of recruits. Let’s be honest, putting moral dilemmas aside, if the firm were reputable and added significant weighting to a resume, the concept would be somewhat more palatable, particularly if there was no way of discerning whether the candidate was a typical employee or whether they had paid a fee to participate in this program.

As it stands, new lawyers would be taking a massive gamble on the quality of the program itself and how future potential employers would perceive the program. Having said this, this is the situation as it stands with practical legal training providers, where law graduates pay fees in order to gain the qualifications required for admission, with no sure prospect of a job on the other side. The difference being however, a practical legal training provider’s primary source of revenue and therefore focus, is the trainee. With Adlawgroup’s concept, there is the possibility of Adlawgroup earning revenue through the work output of the participant, in addition to the participant paying fees to engage in the work output.

Moral and ethical considerations 

Another reservation I have is that the program is just another expense that new lawyers may feel pressured to incur in the hope of breaking into the legal profession.  On the other hand, I think the harsh reality of being a graduate or a new lawyer is too well known now for prospective law students to claim that they were duped or misled into pursuing a career in law.  However, it’s that blurry line between taking responsibility for ones’ actions and the expectation that educational institutions and employers will operate ethically. The payment of the $22,000.00 would not be funded by HECS or FEE-HELP and is therefore presumably an out of pocket expense.  I would not have been, and am still not, in a financial position to pay this amount. This narrows the demographic of candidates somewhat; to those that have a low opportunity cost i.e. limited options for other paid employment, yet are financially well off (or willing to incur debt by taking out personal loans) and possibly those who are hell-bent on practising law and are willing to disregard the fact that they could be earning more in other vocations.

Arguably, there are employers already out there capitalising on the oversupply of new lawyers by extracting a better deal from employees than they may otherwise have gotten away with. Arguably, this is what has always happened in a less blatant manner, new graduates/lawyers working extremely long hours and accepting low pay to gain experience in order to see returns later on. I am a believer of working hard and not having unrealistic expectations or entitlement.  However, there is something about the notion of blatantly charging for employment which dregs up moral and ethical questions, not only about the concept itself but with the issues around the oversupply of graduates as a whole, and what is considered reasonable when it comes to employment opportunities.

I again return to the point that in a traditional law firm, the employer’s primary objective is to earn revenue through the provision of legal services, whether or not they are paying their employees the legally prescribed minimum based on market conditions is incidental.  In the Adlawgroup model, it’s almost the other way around. It is my interpretation that Adlawgroup’s primary objective (at least for the time being based on their website) appears to be generation of revenue from their employees whilst the provision of legal services appears to be incidental. Does this provide the right environment for legal training? After two years, provided the program actually counts as supervised practise, the participating lawyers will have unrestricted practising certificates and if they are unable to secure employment, would be able to set up a sole practise. I question whether they would be equipped to do so after two years participating in this model.

Concluding thoughts 

Yes, the legal industry could do with disruption and innovation, however ultimately disruption and innovation should be improving the industry for employers, employees and importantly, for clients and the community.  I’m not convinced that this type of model is what the legal industry needs, but I stand to be corrected. If benefits can be demonstrated through more accessible legal services to the community, and through new lawyers being provided opportunities beyond the program to professionally, responsibly and sustainably practise law, then I stand to be corrected. After all, new lawyers are consenting adults, capable of weighing up the risks and rewards.  Until these benefits can be seen, I remain a sceptic.

What are your thoughts? Would you sign up? If you are an employer, what are your thoughts on the experience that candidates would gain through this model?

That Career Girl

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