What would you do if you found out that a member of your staff had committed what in a reasonable person’s opinion, amounted to serious/gross misconduct? Would you look to get rid of them as quickly, cheaply and quietly as possible by means of a Settlement Agreement (replaced Compromise Agreements on 29 July 2013), or would you pursue matters through the firm’s disciplinary process and take any knocks that may come as a consequence?
Brian Rogers, Director of Regulation & Compliance Service at gives his thoughts on the issue from both a regulatory and human resource perspective.
When faced with problem staff many firms have historically chosen to get rid of them by means of a Settlement Agreement, thereby saving the firm from all the potential employment problems that could arise from taking such formal disciplinary action; many firms have just wanted to get rid of problem people and didn’t care what happened once they had gone!
But could such an approach put the firm in hot water with its regulator?
Under the SRA Code of Conduct (Outcome(10.4)) a firm must:
Report to the SRA promptly, serious misconduct by any person or firm authorised by the SRA, or any employee, manager or owner of any such firm;
Indicative Behaviour 10.6 says a firm should:
Respond appropriately to any serious issues identified concerning competence and fitness and propriety of your employees, managers and owners.
The question is, would using a Settlement Agreement be an “appropriate response” where someone has committed what, on the face of it appears to be serious misconduct? The answer from the SRA is likely to be a resounding “no”!
Based on the above, the SRA would in all likelihood want to see a firm taking steps under its disciplinary procedures, and should serious misconduct be found at the hearing and upheld at appeal (if requested), report to it as required under Outcome 10.4.
Firms looking to take the “easy way out” need to consider what other parts of the SRA Handbook they could be breaching in taking such a route, for example, the authorisation rules, core principles relating to integrity, best interests of clients, public trust, business management, etc.
A firm looking to report alleged serious misconduct to the SRA before any hearing has taken place, needs to consider the risks it runs in doing this as the individual concerned could accuse the firm of pre-judging the outcome of the disciplinary process, so care must be taken not to report too early; this could also apply should a firm report to the SRA after an initial hearing but before a finding is ratified should an appeal be lodged.
The following case study shows how a firm may want to act should such a case arise:
A paralegal contacts a third party and purports to be a solicitor acting for a client in order to obtain details relating to a member of their family; a fellow employee overhears the conversation and reports their concerns to the firm’s COLP.
Areas of potential misconduct include:
- Criminal conduct (Solicitors Act s21 – it is a criminal offence to pretend to be a solicitor);
- Failure to act with integrity;
- Failure to maintain the public trust;
- Unfair advantage of a third party
On the face of it there is a case to be made for serious/gross misconduct and the firm should “respond appropriately”, which in effect means it should follow its disciplinary procedures to its end; the firm should consider the risks of reporting to the SRA at this point.
The firm finds the employee guilty of serious/gross misconduct and dismisses them; the employee lodges an appeal but the original findings are upheld. The firm is now unlikely to face accusations of pre-judging the outcome if it reports the issue to the SRA at this point.
There are clear conflicts for a firm to balance in relation to their duties to ensure the future commercial success of their business and their duties to report serious misconduct to the regulator, and it is for each firm to determine which direction they would prefer to take, but clearly the risks of failing to report to the SRA need to be considered.
It has to be assumed that the SRA would want to investigate any report of serious misconduct, and where appropriate take its own regulatory action against the individual concerned, but what would happen if it chose not to do so or decided that the conduct was not in its view serious enough to warrant anything more than a “slap on the wrist”? Could the individual use the actions of the regulator to take their ex-firm to a tribunal for unfair dismissal?
No doubt this issue will focus the minds of employment lawyers advising law firms on cases involving serious/gross misconduct and settlement agreements, for example, should they be advising the firm to use a Settlement Agreement if that could then expose them to action by the SRA at a later date; could such advice be seen as negligent because the lawyer focused purely on commerciality and failed to look at the regulatory aspects of such advice?
Sweeping things under the carpet may have been a favoured option in the past but it could come back to haunt firms taking this option now!
Brendan O’Brien, Managing Director of Breeze & Wyles Solicitors LLP said: “This is a very difficult issue to balance as a law firm manager. Older employment contracts may not be sufficient to provide safety to the law firm when it considers the balance between its commercial duties and its regulatory duties.
The changes highlighted in this article are serious enough to warrant a review by law firm managers of their employment contracts to ensure that Gross Misconduct includes the issues highlighted within this article. However, equally as important is to ensure that the employment contract dissociates any SRA outcome from internal disciplinary proceedings by way of reference to the impact of those actions on the good standing of the law firm.