Among regulators across Canada, and internationally, there is increasing interest in proactive regulatory initiatives that focus on better practice management to achieve improved client service and professional conduct. Traditionally, law societies have worked to ensure proper professional conduct by establishing rules and by discipline. This is primarily a reactive, complaints-driven process.
The Law Society of British Columbia, Prairie Law Societies and the Nova Scotia Barristers’ Society are all considering proactive regulation. Other regulators in Ontario have implemented forms of proactive regulation, as have legal regulators in Australia and in England and Wales.
Last June, the Law Society of Upper Canada established a Task Force, which I chair, to consider whether it would be beneficial to implement some type of proactive, compliance-based entity regulation in Ontario.
Why consider Compliance-Based Entity Regulation?
The Law Society’s research to date indicates that lawyers and paralegals who focus on how their practices are best managed and who establish policies and procedures to achieve their professional goals achieve greater success in their professional practices.
Evidence from other jurisdictions indicates that improvements in practice management led to a reduction in complaints. In 2014, over half of complaints received by the Law Society involved client service and other issues related to practice management, such as conflicts, communications and accounting issues.[i] The Task Force is exploring whether some of these complaints could be avoided with more reliable and appropriate practice management tools.
The Task Force is considering entity, or firm regulation, in tandem with compliance-based regulation, as firm culture can heavily influence the practices and ethics of practitioners. The Law Society’s current regulatory structure is focused almost entirely on individual lawyers and paralegals. According to Professor Adam Dodek, “while law firms are ever present in the practise of law, they are peripheral in the regulation of lawyers in Canada.”[ii]
Initially, the Task Force is looking at compliance-based entity regulation in private practices. However, if the Law Society adopts this form of proactive regulation, we may then consider the specific needs of different practice areas, such as corporate and in-house counsel, and practitioners in government and legal clinics. There would be additional consultation in this case.
What is Compliance-Based Entity Regulation?
Compliance-based regulation is a proactive regulatory approach in which the regulator identifies practice management principles and establishes goals and expectations for legal practices. Lawyers and paralegals report on their compliance with these expectations, and have autonomy in deciding how to meet them. Importantly, practitioners are not made to adopt policies and procedures that may not make sense in their practice. Instead, practitioners themselves decide how to meet established goals and expectations with assistance being provided, if wanted.
Under compliance-based entity regulation, lawyers and paralegals are required to implement a system of practice management principles, which is also sometimes referred to as an “ethical infrastructure.” As explained by Professor Amy Salyzyn, these are the policies, procedures, and workplace culture within a law practice through which lawyers and paralegals fulfil their professional and ethical duties.[iii]
Professor Salyzyn, who was also involved with the development of the CBA Ethical Practices Self-Evaluation Tool, describes ethical infrastructure as “everything within a law practice that impacts how members of that law practice relate to, or fulfil, the duties owed to clients, the justice system and the public more generally.” Elements of an ethical infrastructure might include a conflicts checking system or guidelines for client communications. Many practices already have this type of infrastructure in place.
What might compliance-based entity regulation look like in practice? As an example, under this type of regulatory system, the Law Society could require practices to have a file management policy or process in place to ensure the physical integrity and confidentiality of client files. Practitioners would be free to establish what makes sense in their practice and does the job. The Law Society would provide resources to practitioners and help them identify appropriate supports to develop their own policies.
Feedback received from practitioners who have participated in some of the Law Society’s current proactive initiatives, such as Spot Audit, was extremely positive. Of the lawyers selected for an audit in 2014, 97 per cent reported high approval ratings for the program.[iv] The Task Force is interested in ensuring that as many practitioners as possible experience the same benefits.
One size does not fit all
Proactive regulation is more flexible than a prescriptive, rules-based approach. It allows firms and practitioners to establish processes that work best in their particular practice environments. The Law Society recognizes that no one model will work for all firms and there is no one size fits all approach. What matters is that practitioners turn their minds to the model that fits their practice and that they are accountable for doing so. The Law Society recognizes that sole and small firm practitioners may face unique challenges. If a decision is made to proceed, the Law Society would provide resources and guidance to ensure a smooth transition to a system that will support better legal practices.
The Task Force is currently consulting on compliance-based entity regulation. We would like to hear from lawyers and paralegals from all size firms and practice areas. We will benefit immensely from hearing practitioners’ perspectives on what may, or may not, work in their practice environment.
I urge you to read our consultation paper, which is available at www.lsuc.on.ca/better-practices, and provide us with your thoughts by March 31.
Ross Earnshaw, a bencher of the Law Society of Upper Canada since 2012, is the Chair of the Task Force on Compliance-Based Entity Regulation.
[ii] Adam Dodek, “Regulating Law Firms in Canada”, (2011) 90 Canadian Bar Review, 383
[iii] Amy Salyzyn, “What If We Didn’t Wait? Canadian Law Societies and the Promotion of Ethical Infrastructure in Law Practices”, (2015) 92 Canadian Bar Review, 507