Deloitte Class Action Indicative of Legal Future

Earlier this year, Justice Perell approved a replacement class representative in Sondhi v. Deloitte Management Services LP on a motion for what has already been an exhausting certification process in a class proceeding.

The matter involves a class, who although technically are lawyers, have not been considered as such by their employer or the parties procuring their services. These members typically consist of younger lawyers and new graduates who have been unable to otherwise find employment as lawyers in a traditional context.

I do know many of these young lawyers. I know that they are bright and talented, and would likely make excellent lawyers in a traditional context. But they are just one of the many casualties of the changing legal market, where downward pressures for cost, and increase ability to make demands on otherwise unemployed or underemployed labour supplies.

There’s nothing particularly nefarious about what the defendant was doing here, which was taking advantage of the fact that there has been unemployment in the Canadian legal market for the past decade, particularly pronounced among young lawyers. If anything, they are providing them with opportunity, and some limited experience, which may otherwise help them in their careers down the road.

The majority of these young lawyers are engaged in document review. Not particularly glamorous work, but not unknown to young associates and articling students in large firms across the country. What some firms have realized is that they can outsource this less desirable work to a third-party, and potentially save money in doing so.

Several firms have experimented with conducting this outsourcing overseas, particularly in common law jurisdictions such as India, where the savings are even more significant. Repatriating this work to Canada has been possible given the changes in our domestic job market, and also based on the inevitably superior product often provided by lawyers who are educated and trained in this jurisdiction, with English as their first language.

What gives rise to the class action is that these individuals are characterized as independent contractors, and thereby benefits under the Employment Standards Act such as vacation pay, public holiday pay, overtime, and compensation for improper remittances. Although lawyers would fall under the exclusions for overtime and some of the other protections under the Act, this arrangement was apparently more financially beneficial for the employer because they could provide compensation well below the going rates for junior associates in law firms.

My understanding is that they are also required to obtain their own insurance and maintain good standing with the law society, even though their employer claims they are not providing legal services. This has understandably given rise to critiques that this approach has really been an attempt to circumvent the regulator, apparently with much success to date.

Justice Belobaba described the case in the following terms in the replacement representative ruling last year,

[3] Like many unemployed lawyers in the Toronto market who are between jobs or pursuing other careers, Shireen Sondhi earned extra money as a document reviewer. As already noted, document reviewers are hired by a document review company as independent contractors to work on discrete projects. They decide which projects to work on and they work on their own schedule, docketing their time and earning about or just under $50 per hour.

He did not find the proposed representative plaintiff appropriate because she had never worked overtime, one of the key claims for the class, and had abandoned the practice of law entirely, moving to British Columbia. She had effectively “opted out” of working in the profession entirely, one of the unfortunate outcomes we already see for far too many young lawyers.

However, these types of facts around a representative plaintiff are rather rare in class proceedings, and the plaintiffs were provided an opportunity for a replacement plaintiff, which was reviewed by the judgment released this year.

What makes this more recent motion interesting is that the defendants attempted to disqualify the new representative plaintiff on the basis of a conflict of interest, which is a basis for disqualification under s. 5(1)(e) of the Class Proceedings Act, 1992. The basis for the alleged conflict was that it appeared that the majority of the proposed Class Members do not even want to be determined to be employees. Doing so would likely make the consulting business non-viable, likely leading to a termination of their relationship and complete unemployment for this proposed class.

To put it more bluntly, some young lawyers may be so desperate for work, which is not surprising given rising tuition, that they would rather opt out of protections that all employees normally have than to face the prospect of being unemployed. Those who think that lawyers cannot be a vulnerable group could look to this case as evidence to the contrary.

Of course class members can opt out of an action or a settlement, thereby preserving their right to pursue an action independently. However, the Defendants claimed that the proposed class here could not opt out because s. 5(1) of the Employment Standards Act, 2000 forbids any contract or waiver that would abridge an employee’s rights under the Act.

Justice Perell rejected this argument, citing s. 27 of the Class Proceedings Act, 1992, and stating,

[74] Deloitte’s argument that the putative Class Members’ rights to opt out or to not opt into a settlement are illusory, however, is mistaken. The fallacy of the argument follows from the legal fact that the determination of the common issues is only binding on the class members who do not opt out.

[75] Under the Class Proceedings Act, 1992, there are no positive or negative issue estoppels with respect to class members that opt out. A person who has opted out is not bound by the judgment on the common issues, and a person who has opted out cannot claim the benefit of a judgment against the class action defendant. In the case at bar, both Deloitte and the putative Class Members that opt out are lawfully entitled to carry on as independent contractors.

[77] In the case at bar, for the class members that opt out, there will be no determination whether or not they are employees, which is a prerequisite for s. 5(1) of the Employment Standards Act, 2000, to operate. There will be no declaration of the status of the persons who opt out, be that status employee or independent contractor. Thus, the premise of Deloitte’s conflict argument is false, and this argument is a not a reason to disqualify Mr. Phillips. The general rule is that it is not a conflict for the representative plaintiff that some of the class members may not desire to pursue the claim applies.

That doesn’t mean that if a large number of young lawyers opt out of the action it entirely irrelevant. Although a large number of opt outs is not a basis for decertifying a class action under s. 10 of the Class Proceedings Act, 1992, Justice Perell clarified that it may reveal that the class action no longer satisfies certification criteria. More importantly, the potential for a high level of opt outs is not a reason for denying the certification of a class action in the first place.

The costs decision for this motion, released last week, awarded the plaintiffs a whopping $353,790.88.

Certification of this action under the new representative plaintiff means that the business model of using consultants to conduct routine work historically provided to young associates and articling students may no longer be financially viable. Instead, we may see the growth of what some other firms in Canada have already started experimenting with, in hiring law graduates to do this type of work in-house, but not as lawyers. They have no access to the partnership track or equity in the firm, typically are paid quite a bit less than associates of the same year of call, and sometimes are not treated or considered as comparable lawyers to the rest of the firm.

Those lawyers may still just be happy to be employed. The concern arises where document review lawyers disproportionately consist of racialized young lawyers, or female lawyers who demand greater constraints on work hours. Even though work-life balance, and family care needs, should be an issue shared by both genders, we still find that women – even female lawyers – bear this burden unequally in their private lives.

Creative employment relationships themselves have a limited expiry date for practice management considerations of the future, as these routine tasks will likely be the first targeted by technology and automation. Perhaps those underemployed young lawyers should invest in those innovative strategies in the interim, preparing themselves for the the changes to come and positioning themselves to be leaders in these areas.

With enough alternatives, young lawyers may opt out of the traditional big firm model entirely.

 

Comments

  1. Underemployed Lawyer

    I’d like to add that Deloitte has been lowering and lowering their hourly rates and its been years since they paid the 50 dollars an hour figure. But, of course, reviewers are still expected to pay own CPD, LawPro and LSO fees. In essence, we make less money each year.

  2. Philippe Gollin - noticia LLP (Ottawa)

    noticia LLP stands with the other Canadian law firms providing legal document review as opposed to using non-law firms for legal review. It doesn’t cost more less, and eliminates some very serious risks. http://www.noticialaw.com

  3. I’m abit lost here. There are other professionals outside the lawyer world, that also do document review.

    Question is what is the document review for and level of risk when providing an evaluation or analysis for a corporate client.

    If document review requires interpretation or application of law to provide a value-added written opinion for client, this may justify use of lawyer’s legal analysis. (Other professions do have a lock on legal analysis: engineering and building code interpretation requires an engineering background, not lawyer.) If not, then the underemployed lawyer has accepted a role that does not require legal analysis nor legal discovery. Latter statement is outside of the class action concerning contract vs. employee terms.

  4. Doc Review Lawyer

    I’d like to correct something you wrote in your article – “There’s nothing particularly nefarious about what the defendant was doing here, which was taking advantage of the fact that there has been unemployment in the Canadian legal market for the past decade.”

    You don’t think there’s anything wicked or evil about asking us to commit to a 6 month project at Deloitte or Wortzmans or Epiq or CounselQuest, where we turn down other projects only to find out after a week or a few days that this 6 month commitment we just made has been unilaterally terminated without any notice (where these firms knew all along that it was highly likely the project would never last more than a week, yet never advising us of same) . Exerting all of the power of an Employer over its employees is exactly how these firms operate, but they do it under the guise of an Independent Contractor relationship so that they don’t have to pay any of the benefits granted employees under the Employment Standards Act. So yes, they are evil as they are knowingly circumventing employment laws and regulations under their false classification of an independent contractor relationship.

  5. Doc Review Lawyer,

    We don’t normally approve anonymous comments here, but I’ve posted yours because on this particular topic I believe it is important to provide a voice to those affected, without adversely impacting their jobs.

    Employers across Canada “take advantage” of unemployment, through downward pressure on wages, and increasingly providing limited-term and contract work instead of indefinite term employment. This is a trend that we are seeing across all sectors, and is not limited to the law.

    That does not mean that such arrangements are not without exploitation, and they are in large part the reason for the legislative reforms found in Bill 148.

    Importing morality terms about good/evil are less helpful in my experience than the analysis as to whether an employer is treating an independent contractor as an employee, thereby depriving them of the entitlements they may have under statute, or whether the contractor is so reliable on the contract that they may be deemed a dependent contractor, and thus, an employee.

    It’s intrinsic to the nature of employment law to challenge these classifications, and generally we are more effective in doing so when we perform this exercise without allowing undue emotions into the analysis.

    That’s not to say that there cannot be empathy for those involved, and how it impacts them, and I certainly would state that the profession has not done enough to address these issues. The role of the regulator in commenting on this, or of our advocacy organizations failures in assessing whether the power imbalances may have shifted too much, are all worthy of scrutiny.

    This class action is therefore important not only for the specific relief that may be provided to the class members, but in its ability to bring to the attention of the profession what has been a growing problem for many years.

  6. Doc Review Lawyer

    Like you mentioned in your article, contract lawyers have been unable to expose the abuse of power by these firms for years for fear of losing their livelihood. These firms not only circumvent employment laws, but are also very oppressive in nature. Do you suggest that forcing its contract lawyers to sign out for 1 minute bathroom breaks, and work in dirty, hot, cramped spaces with insufficient amounts of light is not evil? Sounds more like a sweatshop in China than it does a workspace for lawyers in Toronto, doesn’t it? If you experienced it for yourself, you may feel differently.

  7. Crystal O'Donnell

    In my view, if you are required to be a called member of the Bar, obligated to maintain LSO standing and obtain LawPro insurance, it is a recognition that you are providing a legal service. LawPro’s website very clearly states that it considers review for relevance and privilege and identifying documents beneficial or prejudicial as the provision of a legal service.

    Note also that the Law Society Act defines legal services as:

    1 (5) For the purposes of this Act, a person provides legal services if the person engages in conduct that involves the application of legal principles and legal judgment with regard to the circumstances or objectives of a person.
    6) Without limiting the generality of subsection (5), a person provides legal services if the person does any of the following:

    2. Selects, drafts, completes or revises, on behalf of a person,

    vii. a document for use in a proceeding before an adjudicative body.

    All non-law firms providing these services are not legally permitted to provide legal services and therefore have to take the position that they are not. As Omar outlines above, and as referred to in the Financial Post article, the problem is compounded by the fact that the Law Society seemingly refuses to address this issue.

    A decision by the Federal court in New York on similar facts and similar legislation determined that the review of documents for relevance and privilege was a legal service, and therefore the contract lawyers were exempt from the Employment Standards legislation.

    Interestingly, the underlying legal issue is conveniently avoided by all parties in the Deloitte class action. It is dispositive of the action.

    There are a number of law firms which provide discovery services which comply with the regulatory requirements, maintain appropriate LawPro insurance, comply with the Rules of Professional Conduct and protect solicitor-client privilege. Non-law firms cannot provide those protections to clients.

    As lawyers, pursuant to the Rules of Professional Conduct, we have a positive obligation to prevent the unauthorised practice of law and the unauthorised provision of legal services. LawPro has proactively addressed this issue – we should be asking why the Law Society has not.

  8. Let’s not take the attention off the disturbing treatment of lawyers in Toronto engaged in document review work. Firms want to limit the amount of bathroom breaks and ban drinking water / eating at our desks. These sweatshops should be exposed and dealt with accordingly.

  9. ediscoveryrulz,

    If those facts are actually substantiated, it would strengthen the “control test” that we use in employment law to find that an independent contractor is an employee who would therefore be entitled to statutory protections.

    The Ontario Superior Court of Justice recently referenced this in Beattie v. Women’s College Hospital,

    [24]           In McKee v. Reid’s Heritage Homes Ltd.2009 ONCA 916 (CanLII)256 O.A.C. 376, at para. 34, the Ontario Court of Appeal outlined the following two-step process to determine a worker’s status:

    [T]he proper initial step is to determine whether a worker is a contractor or an employee, for which the Sagaz/Belton analysis … controls. … The next step, required only if the first step results in a contractor conclusion, determines whether the contractor is independent or dependent, for which a worker’s exclusivity is determinative, as it demonstrates economic dependence. [Emphasis in original.]

    [25]           As stated in McKee, the first step is to determine if the worker is an employee or a contractor.  The leading approach is the “control test”, initially developed by the Privy Council in Montreal (City) v. Montreal Locomotive Works Ltd.1946 CanLII 353 (UK JCPC)[1947] 1 D.L.R. 161 (U.K.P.C.), and further refined by the Supreme Court in 671122 Ontario Ltd. v. Sagaz Industries Canada Inc.2001 SCC 59 (CanLII)[2001] 2 S.C.R. 983, and the Ontario Court of Appeal in Belton v. Liberty Insurance Co. of Canada (2004), 2004 CanLII 6668 (ON CA)72 O.R. (3d) 81 (C.A.).  This analysis requires courts to consider the following factors: (a) control, (b) ownership of the tools, and (c) opportunities for profit from performance of the tasks and degree of financial risk assumed.

    As I’ve indicated above, the potential for this class action is to raise more than just compensatory issues for the proposed class.

  10. Omar Ha-Redeye, the statements made by ediscoveryrulz are true at one doc review company in Toronto.

    All doc review companies tell you where you’ll work, what hours you may work, how many hours you’ll work per week, what day you will start and finish a contract (with no advance notice to you, sometimes not even a few hours) and will give you quotas on how many documents you must review in a day/hour. They will provide you with a computer and and the software and the training. They will forbid you from subcontracting your work. You cannot maximize your profit by working more hours as the companies have a minimum and a maximum of hours you may work. You also can’t work for multiple document review companies at once (as most expect you to be on their premises during business and after business hours). They dictate the hourly rate (with Deloitte lowering it periodically every few years). There is no room for negotiating. You can show up at 9 am and be told that there is a tech issue so you should go ahead and take your unpaid lunch now. Sometimes you will be told to just go home go for the day and “be on call” till they need you again.

    There are some differences between the companies and some of them don’t follow everything I mentioned above but this is generally true.

    Your options include accepting or not accepting a contract (at the risk that you will not be invited again if you turn it down) and some flexibility over the work hours.

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