The global financial crisis and the Fair Work Act are keeping employment and workplace relations lawyers busy, writes Craig Donaldson, but the work is about to get a lot more complicated.
The global financial crisis has had a noticeable impact on the legal business, with slowdowns in work for many practice areas. However, one area that has bucked this trend is employment law and workplace relations, thanks to the effects of the economic downturn coupled with the introduction of the Fair Work Act 2009.
Murray Kellock, a partner in the workplace and employee relations practice at Mallesons Stephen Jaques, says there has been an increase in requests for restructuring advice involving redundancies and downsizing, particularly in the manufacturing and financial service industry.
"We are also seeing a significant number of litigious claims made by senior executives challenging their termination and the payments provided to them," he says. "This type of work seems to be driven by the current economic downturn."
Graeme Smith, head of Freehills' employee relations practice, says the global financial crisis and its impact on the Australian economy is clearly making clients more cost conscious, and this is having some impact on levels of work. However, he says there is no consistent pattern because clients must still deal with litigious matters, industrial disputes, enterprise bargaining under the Fair Work Act and the like. "States like Western Australia are particularly active," he says.
Fair Work's impact
The Fair Work Act has started with a much bigger bang than most people would have expected, according to Joe Catanzariti, head of Clayton Utz's national workplace relations, employment and safety practice group.
"There has certainly been a spike in industrial activity since the legislation took effect, in interpretations of how good faith bargaining will work, debates about rules of evidence and ballots, and we see all of that unfolding as people try to interpret what the legislation actually means," he says.
While the policy itself is pretty clear, Catanzariti says that quite often the interpretation of the policy by regulators doesn't line up with what was intended in the legislation. "I had not anticipated, for example, that much would happen early on in the cycle with good faith bargaining, and it has," he says.
"That probably suggests that the regulators are pushing the button too early, because it's only been around six or seven weeks, and we're getting good faith bargaining orders already. The legislation talks about following a process before orders are made, and yet the regulators are making orders far more quickly. It may be that there will be some fine-tuning of the legislation over the coming 12 to 18 months."
Kellock says the legislative reforms created by the Fair Work Act have led to Mallesons' workplace and employee relations group being "extremely busy" over the past 12 to 18 months. "I have observed more than a 20 per cent increase in industrial and employment law work, largely from existing clients, but also from new clients coming onboard," he says.
"I expect the work levels to continue to increase, certainly in the short to mid-term, as clients seek to come to grips with the new reforms.
In the industrial relations space, he says clients are particularly concerned to understand what will and what will not constitute good faith bargaining, and what an expansion of union rights of entry means for them. "In the employment law space, it is all about gearing up to ensure compliance with the new National Employment Standards and modern awards from 1 January 2010, and understanding the new unfair dismissal framework," he says.
Both Catanzariti and Kellock also note that there are some issues with the new transfer of business rules. Because outsourcing transactions are now subject to these rules, Kellock says this is causing "quite a headache for some clients", while Catanzariti also notes that there is a greater dialogue between corporate lawyers and employment lawyers because of transfer of business issues.
Aside from the global financial crisis and the Fair Work Act, there has been a general increase in employment litigation particularly in Victoria and New South Wales, according to Freehills' Smith.
"Employees are becoming more aware of their rights and there appears to be a greater preparedness to pursue these rights, including instituting legal proceedings. I would expect this trend to continue - particularly with growing unemployment resulting from the GFC," he says
Another trend impacting on Mallesons' workplace and employee relations practice relates to corporate governance and the proposed Corporations Act reforms to senior executive termination benefits.
"There is no doubt this area is going to be more regulated than it has been in the past and the question for all publicly listed companies is whether or not their senior executive employment arrangements will need to be approved at the shareholder level," says Kellock.
Proposals relating to taxation changes affecting share schemes are also keeping the firm busy, and he says these areas will fundamentally change the way in which senior executives are remunerated.
"I think it is fair to say that this area [of workplace and employee relations] is only going to get more complex and detailed going forward," he says.
"We are living in a world of greater regulation - and that will only continue across all facets of the employer-employee relationship and also the employer/trade union relationship. And, no doubt, there will be a raft of court cases in the next little while deciding key questions and issues arising from the new reforms."
Changing with the times
Law firms have had to become more responsive to clients' needs as a result of the global financial crisis, with a focus on better service and value for money.
There is likely to be growth in the areas of employment litigation, strategic advice and litigation around enterprise bargaining and occupational health and safety, and Smith says Freehills is currently focusing on ensuring that it maintains its depth of experience and talent in all of these areas to deliver cost-effective outcomes for clients. "Clients are more demanding of better value for money from their lawyers and we are determined to deliver it," he says.
Catanzariti says that all the major law firms have addressed their fee structures during the downturn and that Clayton Utz has held rates at current levels for this financial year. "Clients are rightly very focused on value for money and trying do to things smarter, as well as avoiding litigation. That should always be the case, but people are putting it into practice more so now," he says.
Catanzariti is also critical of the practice of bringing lawyers from other practice areas into employment law as a result of the economic downturn on a firm as a whole. "We won't do that," he says. "My view is that you can't turn people into employment lawyers overnight ...Some firms are just saying 'Let's make people workplace lawyers.' I think that's a bad thing for clients, because clients should expect and have access to specialist expertise in the area."
Because workplace law has always been a grey area, he says this will create some risks for corporations in particular if they are seeking advice from people without genuine expertise. "That will come back to cause problems," he says.