The perfect storm inside top law firms
Something unprecedented is happening among the legal eagles: the fledglings are revolting.

In September last year, management at top-tier law firm Ashurst received a letter unlike any they had seen before.
Nineteen of the young lawyers who had just completed the firm’s prestigious graduate program had banded together to ask for more money.
The $80,000-plus salaries they had been on as grads, and which were going up now they had finished the program, may have seemed hefty but compared to the riches being offered by similar firms, the sums were less impressive.
An internal meeting followed. The 19 junior lawyers received explanations about their pay and the status quo was maintained.
But a few months later, some started receiving backpay for the long hours they pulled as grads. It was one of several unprecedented events in the legal industry in the past 18 months.

Culture shock
SafeWork investigations into lawyer fatigue and overwork, new industrial rules on hours and pay and an extraordinary push to re-regulate the sector have shaken up a decades-old culture.

All three of the events culminated in the revelation this month of widespread firm reviews into whether graduate lawyers have been underpaid due to excessive hours.

While many firms are yet to uncover issues, the revelation some grads at Ashurst were underpaid between $10,000 and $15,000 raises questions about how far underpayments will spread.

For such well-paid staff to earn below the minimum hourly rate would require hours well beyond an extra few a day and suggests around-the-clock weekend and late night work.

Lawyers have complained of working more than 60 hours a week in the past and in the case of the Hayne royal commission, some were working 16 to 18 hours a day, seven days a week.

Fierce deadlines
Firms blamed fierce client deadlines for the long hours during the commission. It wasn’t unusual to be told at 3pm that something needed to be produced by 9am the next day, even if that involved reviewing thousands of documents.

But such hours were not exceptional and had been a historic feature of the industry.

The rise of medium and large corporate law firms over the past three decades and their use of billable hours targets, sometimes as much as seven hours a day, helped drive a culture of overwork.

One unnamed HR manager for a law firm told an RMIT research project into the legal industry in 2008 that late-night work was even key to firms’ profits.

“Nice premises like this with good equipment and good resources, they come at a cost,” she said.

“We did some figure work not long ago and one of the partners in a very open forum said it’s not until about 5.30 in the afternoon that you actually start making money for the firm, once you’ve covered the rent and the wages and the IT, et cetera, et cetera.”

But despite some discontent, there has never been any serious indication that the culture of long hours was going to change.

An abundant reserve of replacement labour meant high turnover at the junior levels was a sustainable practice for many top-tier firms.

'Fundamental shift'
The past two years, however, have brought a perfect storm of events that suggests the status quo could be changing.

Australian Services Union national assistant secretary Linda White, a former lawyer herself, said she had not seen anything like it in the whole time she had been an official in the area.

“Ten years ago it would be 'too bad, so sad'. But now, graduates aren’t taking it any more. They haven’t swallowed the Kool-Aid of 'you’re all going to be partner some day', because it’s not true and they probably don’t care anyway.”

Australian Law Students Association executive Madeleine Goodsir said the change was happening as early as university, the prime recruiting ground for corporate law firms.

"There’s always going to be people in the profession who accept that culture, but we are seeing a shift from law students and young lawyers away from that, especially around mental health and wellbeing," Ms Goodsir said.

The association, which represents the law societies of Australia's 43 law schools, has "a mandate from students that they want better workplaces that are safe and healthy". It is the first time it has expanded its remit into issues that extend beyond university.

The first sign of change was in October 2018, when WorkSafe slapped top-tier firm King & Wood Mallesons with an improvement notice after investigating fatigue concerns from staff in Melbourne working 16 to 18 hours a day. It was the first known investigation in the industry.

A month later, Gilbert + Tobin was hit with a safety inquiry into overwork, which included claims of substance abuse. The regulator launched another inquiry into the firm a year later.

By February 2019, the industry was facing what it described as a “fundamental shift” in its professional remuneration as Fair Work handed down a landmark decision requiring firms to conduct regular pay reconciliation for grad lawyers and paralegals.

Under the rules, which come into effect in March, firms must record salaried employees' work hours, notify staff of the maximum overtime they can work before underpayments kick in, and then reconcile hours worked with minimum rates.

Law firms slammed the regulation as “antithetical to the dynamic and professional working environment of modern law firms”.

K&L Gates HR head Nick Grant said the new rules created a "real unknown" and marked “a shift away from a culture of trust and autonomy, to a culture of rigid timekeeping and monitoring”.

But while the firms battled it out in Fair Work, law societies and young lawyer associations were also pressuring the industry’s peak body, the Law Council, to take action on overwork and underpayment concerns.

The council usually represents the interests of law firms but the pressure from its lawyer members created a situation where it was almost hopelessly conflicted.

By August, however, the council had put out an extraordinary discussion paper, asking members whether it should push to extend the industry award to cover junior lawyers, not just graduates.

The paper quoted a young lawyer who said he had earned more as a bartender than in his first law job due to the 16-hour days and seven-day weeks that yielded a weekly pay cheque of just $600.

He told a Law Society survey: “General mental health issues arose because I couldn’t really afford to do anything to get my mind off work. I worked and went home so I became quite miserable."

This month, at least a dozen corporate law firms, including all of the big six, are reviewing for underpayments.

SafeWork NSW is also set to host its first forum into the industry next month on how "high job demands, occupational stress and low job controls" risk employees' mental health.

Client comes first
Alex Solo, who worked at a top-tier firm for nearly five years as a junior before founding disrupter firm Sprintlaw, said lawyers working into the early morning hours was a common experience.

He said: “Sometimes there will be someone sitting there until 5pm without work, then a partner gets out of a meeting and sends them work that keeps them there until 2am, and that’s one of the most common stories you hear in law."

Ms White said the discussion paper and SafeWork investigations reflected an industry that was starting to recognise the long-term damage long hours caused to mental health.

“I’ve seen people who suddenly snap and collapse in the foetal position on the desk. You just can’t ignore that – people just not being able to cope.”

For some lawyers, however, the high-pressure environment is worth it not only for the promise of partner riches but also because it is somewhere they actually thrive.

DLA Piper consultant and former Minter Ellison head of mergers and acquisitions James Philips said that as a graduate 30 years ago, he was keen to apply his years of study to help clients.

"My attitude to the moderate pay, high demands and long hours was that I was investing in my own skills and career prospects. I wanted to learn as much as possible as quickly as possible," he wrote in a piece for The Australian Financial Review.

Gilbert + Tobin partner head Danny Gilbert told staff in an email late last year that people had different limits on work hours and it was difficult to set a “one size fits all” rule.

"The amount of rest and sleep required and desired depends on the individual. People may require more or less, depending on their own physiological make-up."

But long hours, he said, were a "reality of life" for corporate lawyers and a challenge firms had to meet.

The question is how far recent events will go to change that reality.

Former Corrs chief executive John Denton said staff needed to be properly paid and taken care of but the client was still the priority.

“The key as a professional should always be that it’s not about the hours, but about what value you’re creating as a client," he said.

“You always have to be available. Matters don’t come at orderly times."

But Mr Solo said he believed the "industry is going to shift".

“You hear it from so many lawyers out there, ‘I love the work but hate the culture’," he said.

“The model of high-intensity work makes sense in a portion of the market, but not the whole market."

Firms say they are encouraging staff to raise concerns with them, including about pay.

Ashurst cited an open-door approach in responding to the letter it received from 19 graduates.

"When a query was raised with us about this, we had a positive and transparent discussion and as a result, no changes were required," a spokeswoman said.