Earlier this year, the Solicitor’s Regulation Authority (SRA) announced its plans to change its rules to allow for further flexibility in how solicitors work, making room for solicitors to use their professional judgement against the standards. The changes also aim to streamline new rules and remove many prescriptive ones, making the new SRA Standards and Regulations shorter and more targeted, focusing on the key issues. These changes are currently anticipated to come into effect on 24th November 2019, after an initial 6-month delay.
Key changes announced include separate codes of conduct for firms and solicitors, allow solicitors to carry out ‘non-reserved’ legal work from an unauthorised business, and, most interestingly perhaps, allow solicitors to provided reserved legal services on a freelance basis. It is this last change that may well shake up the legal marketplace, especially when you consider the changes to solicitor qualification. Combined with concerns over gig economy comparisons and insurance issues, whether this is a positive change has yet to be seen.
How do the Changes Compare?
Under the current Practice Framework Rules 2011, solicitors can only practice in the ways listed in Rule 1.1 as: Registered Sole Practitioners (RSPs); as an employee of an authorised, or non-SRA authorised, organisation, or; work in-house for an organisation. The key takeaway from this, is that under current rules, individuals are regulated through corporate structures, even the slightly misleadingly classified ‘RSPs’. It is against this backdrop that the proposals to allow freelance work appear such a radical departure.
This move is not entirely surprising, considering the advancement of technology and the advent of the gig economy in other sectors. Even the SRA describes this move to allowing freelance solicitors as an ‘uberisation’.
Further to the above, the proposal is set to remove the 3-year rule. The 3-year rule currently prevents solicitors ‘setting up shop’ on their own until their have a minimum amount of experience equalling this. This would also mean that multiple newly qualified freelancers could set up practice together and supervise other solicitors from the get-go; however, under the new rules, freelance solicitors will be restricted in holding client money which could act as a foil to the above freedoms and mitigate against the former hypothetical.
Another aspect which is changing relates to professional indemnity insurance. According to the Law Society’s fact sheet concerning the changes:
Solicitors will no longer share a level playing field with a minimum standard of PII — a regulated firm must have professional indemnity insurance equivalent to the SRA’s Minimum Terms and Conditions, but the freelance solicitor will not need to purchase insurance to the same level.
In fact, all that will be needed is for freelancers to hold “adequate and appropriate” insurance. No guidance, as yet, has been provided by the SRA as to exactly what this means. Further to this, while a regulated firm should have professional indemnity insurance (PII) that meets the SRA’s Minimum Terms and Conditions, a freelancer will not need to meet this same level.
Key Criticisms and Confusion.
While the “adequate and appropriate” insurance can likely form a determinable level to judge a freelancer against, and resolves the potential issue of differing levels of insurance for reserved and unreserved work, this does not remove the confusion this may cause clients; however, these mitigating elements do rely on the SRA explaining what they mean which has yet to occur. It is this confusion, not only lying with PII, that forms the crux of criticism against the changes.
Different models of practice bear the risk of confusing clients who may be unaware of these changes as they occur, let alone the differences in insurance cover the solicitor may be required to have. Sarah Chambers, chair of the Legal Services Consumer Panel, heavily criticised this insurance development.
There needs to be a clear definition and explanation of what ‘adequate and appropriate’ means, especially when the SRA is also proposing that if providers do not meet the obligation under this vague description, the risk would be transferred to the consumer, who will be unable to access the Compensation Fund. The panel strongly disagrees with this transfer of risk.
It is hard to disagree here with Ms Chambers’ comments, as surely it is the SRA’s duty to ensure that all solicitors have appropriate PII and, where they do not, that the client is not the one to bear the risk. The flexibility, here at least, seems to bear a certain level of recklessness; however, there is still time to amend the proposals before they come into force in November 2019, as well as to define “adequate and appropriate”. If this clarity is given, it may well end up assuaging some concerns. A final point to make here is that as of April 2019,
“A lot of insurers don’t understand the existing model and are uncomfortable with the proposals. I don’t know of anyone prepared to support it ”
according to Paul Bennett.
Some more nebulous concerns might relate to a flooding of the market, resulting in the field becoming even more competitive and difficult to penetrate for graduates or newly qualified solicitors via the SQE (Solicitors Qualifying Exam). The interest is definitely there and is huge, as Bennett Briegal partner Paul Bennet mentioned in speaking to a Law Society podcast in July 2019. This could result in a mass exodus from firms, by aspiring solicitors hoping to advance themselves independently. There is an argument for some trepidation from firms as an article from the Solicitor’s Journal, which cites Bennett above, gives a swathe of warnings to those solicitors intending on pursuing freelance careers under the upcoming SRA Rules changes. This being said, the article could also be read as simply offering guidance as to the clear risks of moving to a freelance model of service. This reading does highlight a dearth of official guidance, either by the SRA, or other recognised bodies for solicitors, established or newly qualified, as to the risks and benefits, as well as the best way of migrating to the freelance model.
You might ask whether the expansion of the Standards and Regulations to include freelance as an option will pose a threat to the traditional firm. It is likely too early to say, though the current lack of any platform to promote and allow for client comparison, for example, may show this as a model that will take some growing into; however, when one considers the new SQE that will come into force in 2021, there is the potential that the market may flood as newly qualified solicitors seek to avoid the competitiveness of gaining training contracts with established firms and seek to further their ambitions privately under the freelance mode.
While the above criticisms and potential confusions hold some weight, in light of the announced changes, there is also certainly the scope for some improvements to the system. One of the places these benefits might be most acutely felt is through facilitating or further encouraging pro bono. Currently, for those solicitors working in firms under Rule 1, the only way to practice pro bono is by volunteering and requires the firm to have agreed to this. Compared to this, freelancers can be engaged by law firms as well as being permitted to carry out pro bono work (e.g. at clinics) on their own accord without having to seek firm permission. The obvious critique of this benefit is that it relies on freelancers choosing to, or prioritising, pro bono work instead of paid services with their newfound flexibility to do so. Further to this, under current Rule 4.10 of the Practice Framework Rules allows in-house solicitors to volunteer by undertaking non-reserved activities of their own volition, subject to limited conditions; therefore, the changes, and thus the benefits, will likely impact in-house solicitor volunteering for pro bono in a much smaller way.
A further positive, if perhaps not an objective benefit to the field, is highlighted by Briegal who states that “You can, as a highly educated professional holding yourself out for a decent hourly rate, make those documents your best friend and you’ll be in a better place than anyone foolish enough not to”. There are clear challenges that will likely come with the changes for those willing to pursue a freelance career; however, this quote shows that some of the fears surrounding how tenable such an approach may be can be assuaged. It must also not be diminished that these changes will offer the chance for those who wish to further their own legal ambitions without having to tie them to a firm.
A final point to consider is how the new Solicitors Qualifying Exam (coming into force in 2021) may interact with these changes. With the current competitive market for attaining training contracts, and then later securing a position at a firm, it is perhaps fair to say that, upon securing their qualifying legal experience and having passed the Exam, more newly qualified solicitors may gravitate to freelancing. This being said, there is the scope for the market to shift dramatically within the next 2 years and so this is somewhat speculative, but a point to consider nonetheless if you are someone starting your studies with an eye on the Solicitors Qualifying Exam.
Regardless of the criticisms levied against new SRA Standards and Regulations changes, the renewed attempts to shorten and focus them will likely be welcomed. The true impact of enabling freelance solicitors to practice has yet to be seen and more changes may yet be introduced in light of concerns, by the SRA. Furthermore, it is also natural for opinion to be coloured in light of views on the gig economy in general and whether the expansion of this into the legal thing is a positive move. As ever, we welcome your thoughts with regard to these changes and will endeavour to keep you informed as the issue develops.