Does the Proposed 25% LSO Fee Reduction Make Any Sense?

The last six months have been a challenge for everyone. The impacts of the pandemic have differed but no one has been spared. Lawyers and paralegals are no different. We have all been affected, in varying degrees and in varying ways. For many of us, the fact that we provide professional services rather produce goods or provide retail services has helped as many professional services need not be provided in person. Remote work has been possible for many. But some have been particularly affected.

The incomes of those who are employed, whether in business, government, larger firms or otherwise, have generally continued. Some private practitioners have prospered as clients face new legal challenges. Real estate markets have not seized up as they did in the 2008 great recession. But the work available to be done for some has seriously diminished as courts closed and have since cautiously reopened. Many new lawyers and paralegals have struggled as opportunities have dried up. Government pandemic programs have helped some practitioners and better-established practitioners have resources that can be drawn upon.

In the face of serious difficulties, it understandable and appropriate that practitioners look to reduce costs including licensing costs. It is equally appropriate that the Law Society address the costs of regulation which can be particular burden in these difficult times

For those who have paid attention to these matters, the Law Society of Ontario reduced licensing fees for 2020 and has been critically examining the programs undertaken and regulatory burdens. With the advent of the pandemic, the CEO has brought forward proposals for strategic change, some of which have already been approved in principle by Convocation. The 2021 budget is being prepared and will soon be brought forward.

Surprisingly, two benchers gave notice on September 1, 2020 of a motion to Convocation returnable on September 24 to require that the 2021 licensing fees for all members of the Law Society be reduced by no less than 25%. The stated rationale is the claim that “virtually all members in private practice” have suffered a “devasting financial impact” as a result of the pandemic and that access to justice and the public interest requires that members are “able to remain financially viable”.

There are a number of serious issues raised by this motion:

  • Fee reductions in a large arbitrary amount without analysis or reflection on the impact of the reduction are not responsible. The responsible approach is the approach already being taken which is to examine the cost-benefit of particular programs and policies. The motion seeks a 25% reduction. Why not 10%? Why not 50% or 100%?
  • This motion fails to reflect that the Law Society is a public interest governor of the legal professions. Accepting that some members of the Law Society are suffering financial distress, it is highly problematic for the response to be arbitrary cuts of the work done in the public interest. While the claim is made in the motion that the public interest is served by a large arbitrary cut-back, the motion is obviously self-interested. There is no genuine reason to think that Ontarians will lose access to justice and legal services because of the effect of the pandemic on lawyers and paralegals. This is not at all to say that the effect of the pandemic on members is not important. A good regulator should pay careful attention to regulatory burdens. But far too often, professional interest in cost reduction is dressed-up as public interest and the claim that access to justice is genuinely being addressed.
  • This motion seeks an across the board reduction for all members of the Law Society on the basis of need when it is clear that not all members face the same challenges. The motion baldly asserts that the pandemic has had a devasting impact on the revenues of virtually all members in private practice. This is plainly a false claim. No doubt there are members who have suffered significantly. But there are many for whom this is not true. And there are many who have the resources to weather storms. Some private practitioners are in large firms, some are in small firms. Some private practitioners are associates, some are partners or sole practitioners. Some private practitioners have new or marginal practices, others are well established with resources to call upon. Some are dependent on court work. Some focus on real estate and other solicitors’ work. It is plainly not true that virtually all private practitioners have suffered a devasting impact from the pandemic. Superficial generalizations about private practice are not sustainable.
  • In addition to assuming that virtually all members in private practice have been similarly affected, the motion proposes the same large arbitrary fee reduction for those who are not in private practice. According to the 2019 Annual Report, the Law Society has 55,360 lawyer members and 9,470 paralegal members. Of these, 37,900 lawyers and 3,700 paralegals practice law or provide legal services. Only a portion of these members are in private practice and, of those in private practice, approximately 40% of lawyers are in firms of 10 or fewer practitioners[1].
  • The 2020 licensing fee for full fee lawyers is $2,066 and for paralegals is $1,006. This fee includes the amounts required for the general fund, the compensation fund and the capital fund. For lawyers, the amount includes the county and district library fund. A 25% arbitrary reduction would provide a $517 annual cost reduction for lawyers and a $252 annual cost reduction for lawyers. While no one wants to pay more than they should and costs savings are desirable, it is fanciful to suggest that a cost savings of approximately $45/month per lawyer and $25/month per paralegal will save practices from failure which is the stated justification for the proposed fee reduction.
  • There has been no process by which the effect of this motion has been considered. Actual need has not been assessed and is wrongly assumed to be general. Relief is not targeted to where it is needed. The effect of a large arbitrary fee reduction on the public interest regulatory work of the Law Society has not even been considered.

There is important work to be done to ensure that the cost of regulation is no more than it should be in the public interest. Regulatory burden is particularly relevant in these difficult times. A large arbitrary general fee reduction may make suit the political views of some members. But this would not be good policy and would be inconsistent with the long tradition of our professions of responsible self-regulation in the public interest.

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[1] Few paralegals in private practice are in firms of 10 or more.

Comments

  1. With all due respect, the LSO has created this problem through its ongoing lack of transparency. The LSO’s annual financial statements provide virtually no insight into its spending, beyond a high-level program breakdown. For example, the compensation of the CEO and the executive team are not provided. Employee headcounts are not provided. etc.

    Without this kind of information, the question you ask in the title of your post is impossible for anyone not within LSO’s management to answer. Without transparency, I don’t blame the benchers in proposing a blanket cut of this magnitude.

  2. Underemployed Lawyer

    There is nothing surprising about junior lawyers, heavily in debt and with impacted incomes, struggling to pay these bloated fees. Every single jurisdiction in North America manages to do what the LSO does on much smaller fees. This is a real impediment to entry to this profession. Since the LSO claims to worry about access to justice, this is their chance to act. Is this profession reserved only for the wealthy and well connected and only to those who want to pratice in lucrative areas of pratice?

  3. The annual financial statements are far from the only source of financial information. It is simply not true that only management has detailed information. The claim in this motion is not lack of information.

    By way o example, for the 2020 budget have a look at

    https://lawsocietyontario.azureedge.net/media/lso/media/about/convocation/2019/convocation-october-2019-convocation-auditandfinancecommitteereport.pdf

    For a historical review, have a look at http://www.slaw.ca/2019/07/10/the-costs-of-regulation/ which is based on publicly available information.

  4. Thank you Malcolm. While I agree that the motion is largely arbitrary, so has been the impact of the pandemic -different impacts depending on area of practice, locale in the Province, reduction in court and tribunal services, etc. Many sole practitioners were unable to take advantage of the government relief packages because they did not meet the minimum payroll requirements and the Law Society’s attempts to address that situation with the government made things even more difficult by having to show a minimum amount of non-deferrable expenses.
    There are many lawyers for whom the proposed LSO 25% fee reduction will be a welcome assistance and I hope LSO does not remove that despite the fact that some lawyers may not need it.

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