Lawyers’ class action over unpaid employment benefits masks regulatory inaction over unauthorized legal services

Deloitte argues its use of such lawyers does not constitute unauthorized provision of legal services

March 7, 2018

The strategy driving an employment class action between Deloitte and more than 400 lawyers is masking an issue fundamental to the future of the legal profession.

On its face, the case is about whether Deloitte misclassified the lawyers as independent contractors rather than employees and so wrongfully deprived them of statutory overtime, vacation and holiday pay.

Deloitte has taken the position that the lawyers weren’t providing legal services. That suits the class just fine, because individuals providing legal services don’t enjoy the protection of Ontario’s employment standards legislation, on which they found their lawsuit.

At first blush, then, Deloitte’s position seems an odd strategy, because it deprives the firm of the argument that the lawyers weren’t entitled to the benefits they claim in the first place.

But there’s a back story here: admitting that the class performed legal services would almost certainly have exposed Deloitte to charges that the firm was involved in the unauthorized provision of legal services. Currently, only firms owned by lawyers can provide such services.

Only firms owned by lawyers can provide such services

“Deloitte’s position is probably based on conflicts and regulatory issues,” said Andrew Monkhouse, managing partner of Monkhouse Law, who is co-counsel for the class with Samuel Marr of Landy Marr Kats LLP. “The issue of whether Deloitte was providing legal services won’t come up directly in the case, but it is hanging over everything.”

Ironically, perhaps, the Law Society of Ontario (LSO) appears to have provided the impetus for Deloitte’s position.

In 2014, the LSO (previously the Law Society of Upper Canada) dismissed a complaint by lawyer Shireen Sondhi, who described herself as an “independent contractor” engaged by Deloitte to perform document review services that included tasks properly performed only by lawyers. These tasks included determining the relevance of documents, determining whether documents were privileged and the category of privilege the documents attracted, and highlighting documents that were “hot” in the sense of having the potential to significantly impact the success or failure of a case.

There’s little doubt that the allegedly offending services were in fact legal services. The website of LawPRO, the errors and omissions insurer owned by LSO, lists these services as examples of tasks requiring legal skills and judgment.

Still, the LSO dismissed Sondhi’s complaint. In a 2014 decision, investigation counsel Jessica Caplan concluded that the legal judgment involved in Deloitte’s services was provided by an “Instructing Lawyer, who determines the parameters of the document review search.” Presumably, the “Instructing Lawyer” was not associated with Deloitte.

All that the “independent contractors” did, Caplan added, was review and compile documents that met the described criteria.

There is, however, reason to question the decision as, at best, allowing form to trump substance.

In a recent article in LawPRO Magazine, Dan Pinnington, vice-president, Claims Prevention and Stakeholder Relations at the insurer, writes that the profession’s “status quo” is “mostly ignoring legal services providers.” He goes on to say that this option is “easier and less expensive” than prosecution “but it isn’t in the best interest of the legal consumer.”

This may be as true for the business consumer as the retail consumer. In a 2015 case involving an attempt by CIBC to claim $3 billion in business income deductions, Chief Justice Eugene Rossiter of the Tax Court of Canada refused to allow the bank to claim litigation privilege over 670 documents that had allegedly been misclassified by the third party (not a law firm) to whom CIBC had outsourced its document review.

“(The bank) had plenty of opportunity to do (the document review) properly; it chose a certain way of doing it, and it cannot now, many months later, ask for a mulligan,” Rossiter wrote.

Otherwise, the issue of third-party provision of document review and other legal-like services has been so confused that in September 2015, a lawyer employed by a document review company, who spoke on condition of anonymity, self-reported to the LSO because the lawyer was concerned that the company was engaging in the unauthorized provision of legal services. LSO dropped the investigation on the grounds that the regulator was at the time considering allowing alternative business structures (ABS), which would have permitted non-lawyers to own entities providing legal services.

Ultimately, the LSO decided against approving ABS, but no clear policy has emerged.

Susan Tonkin, communications advisor, Media Relations and Communications, responding by email to Legal Post inquiries, said only that If there are allegations and evidence of a breach of the Law Society’s Act, Rules or By-Laws, the Law Society will investigate.”

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