A few months ago, I wrote this post speculating on the proposal by a new Adelaide based law firm, Adlawgroup to charge newly admitted Lawyers $22,000.00 for a job. At that stage, I was speculating on the remuneration structure, but it has been confirmed that the Lawyers would not receive a base salary, but rather a commission.
In this article which was posted a few days ago, The Australian has confirmed that the Fair Work Ombudsman has inquired into the business model but is taking no action. Further, Law Society of South Australia president Rocco Perrotta is quoted saying that he expected a review into the business model to be completed within weeks and that the Law Society had no regulatory powers and could not prevent the firm from proceeding. Apparently 25 applicants are lined up and ready to begin.This is an interesting development indeed, and although Adlawgroup are likely to receive the go-ahead to commence, there are still underlying concerns about how ethical the arrangement is. Check out the comments section in the article on The Australian to gauge the community sentiment.
Could the arrangement be classified as a franchise rather than employment?
Pursuant to the Franchising Code of Conduct, a franchise agreement:
- is an agreement;
- in which a person (grantor) grants to another person (grantee) the right to carry on the business of offering, supplying or distributing goods or services in Australia under a system or marketing plan substantially determined, controlled or suggested by the grantor;
- under which the operation of the business will be substantially or materially associated with a trade mark, advertising or a commercial symbol owned, licensed or specified by the grantor;
- under which, before starting or continuing the business, the grantee must pay or agree to pay to the grantor or an associate of the grantor an amount.
In the event that an arrangement meets the above definition, it will be deemed to be a franchise agreement regardless of whether the agreement is expressed to be a franchise agreement. As the article in the Australian has noted, the Fair Work Commission and the Law Society of South Australia will not, or cannot intervene in the arrangement. If Adlawgroup’s arrangement is deemed a franchise agreement, at least new lawyers will be afforded the protections offered pursuant to the Franchising Code of Conduct.
These protections include:
- stringent disclosure requirements by the grantor prior to signing agreements with grantees;
- a 7 day cooling off period after grantees sign the agreement or make a non-refundable payment;
- obligatory complaint handling and mediation processes; and
- an obligation for the parties to the agreement to act in good faith towards one another.
On the other hand, if the arrangement is classified as a franchising arrangement rather than an employment arrangement, there may be implications about whether the arrangement is deemed to meet the two year ‘supervised employment’ required to obtain an unrestricted practising certificate. Although surely the Law Society of South Australia has already considered whether the Adlawgroup model will satisfy the two year supervised employment criteria as part of their review. Hopefully they release the review findings so that prospective new lawyers can go into the arrangement with some certainty as to the outcome.
Would you pay $22,000.00 for two years of legal supervision? Are you involved with Adlawgroup? I would love to hear your perspective.
(Update: Adlawgroup are now backing away from their controversial business model).
Here in the Philippines, some lawfirms charge new lawyers who then join them as “partners”. The money purportedly covers the shared cost of rent, water , electricity and salaries of secretaries and paralegals.
I believe adlaw’s practice is akin to how nurses here in the Philippines are being treated. Nurses here actually pay the hospitals to employ them as nurses. In return the nurses gain practical employment experience that they need to leave the country for better opportunities. This is probably an effect of an oversupply of labor (or lawyers).