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Firms: Law firms after COVID-19

Firms: Law firms after COVID-19

By Karin Derkley

COVID-19 Interviews Practice Management 

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The pandemic dealt an initial blow to the legal profession, but firms have adapted and regrouped and some are looking at better times ahead as a result.

Just as every individual experienced lockdown differently, law firms also varied in how they were affected by the COVID-19 pandemic and the restrictions put in to curb its spread. 

The first national lockdown from late March to May 2020 put a chill wind through the profession, as staff were forced to work from home, matters had to be heard remotely, and clients’ businesses suffered. Many firms cut salaries, sometimes accompanied by reduced hours, sometimes not. Bonuses were cut, promotions paused and staff hiring plans were put on ice. 

Victorian firms suffered a double blow, enduring an additional four-month lockdown on top of the six weeks experienced by the rest of the country. The slow return to the office meant many Victorian lawyers worked from home for nearly a year. 

But as restrictions started lifting from November, many law firms revealed that what had been expected to be a time of plummeting revenues was instead turning into a period of surprisingly strong growth.

According to CommBank Legal Market Pulse almost eight in 10 law firms in Australia reported stable or rising profits in the 2020 financial year compared to the previous financial year, with an average profit increase of 7 per cent across the sector. Firms are optimistic about the future too, with profit increases of 5.5 per cent expected for the financial year 2021. 

Smaller law firms also reported they were relatively optimistic about their prospects for the year ahead. A survey by Smokeball found that nearly three quarters of Victorian firms expected to be more profitable this year, with nearly a quarter expecting profitability to rise by more than 20 per cent.

The better than expected performance is not uniform though. Firms or teams dealing with criminal law matters, personal injury litigation, and mergers and acquisitions have seen a decline, while others working on bankruptcy, risk management and restructuring have thrived. Property suffered initially, and then saw an unprecedented bounce-back. 

Clients are becoming more demanding, putting pressure on law firms to drive down fees and insisting on fixed fee arrangements rather than the uncertainty of billable hours. The Legal Market Pulse survey found that 64 per cent of firms reported downward pressure on fees, and 61 per cent demanded more work for less. Smokeball found that half of small firms had seen an increase in requests for fixed fee pricing in the past 12 months, and nearly 65 per cent expected those demands to increase in the next 12 months.

The biggest transformation in the past year though has been the wholesale acceptance of work from home arrangements, and the assumption that those will continue even when the pandemic is over. That has put a question over the role of the office in the future, with some firms seeking to reduce their footprint and others seeking to re-envisage the workplace in a bid to entice workers back to the office. 

The LIJ spoke to five firms, both large and small, to see how they fared during the pandemic, what kinds of changes they brought in, and how they are feeling about the year ahead.

Amber MatthewsDLA Piper, Amber Matthews

When the first lockdown hit in March last year, DLA Piper’s employment teams were run off their feet with inquiries from clients about how to manage their workforces, says managing partner Amber Matthews. “We had clients who were concerned that they would be in financial distress, so they came to us for some assistance with refinancing facilities. Other clients needed to raise capital.”

Meanwhile, transactional activity associated with buying and selling large assets, M&A activity, and other corporate practices like tax, slowed down. “But our litigation teams were very busy providing regulatory and strategic advice on things like breaches of contract or force majeure clauses, and how to deal with supply challenges.” The firm’s real estate team has been surprisingly busy throughout the pandemic, she says.

“So it was very much swings and roundabouts – some groups were very busy and others slowed down.” 

The fact the law firm was going through much the same experience as its clients was interesting, Ms Matthews says. “It brought you closer together with your clients because you could see how it is impacting your own business as well.”

The stresses on clients translated into pressure on fees and pricing models, she acknowledges. “Clients wanted more certainty around price and were more keen to see estimates or fixed prices than they ordinarily would. We worked with clients to accommodate that because we understood that maintaining their business health was critical.”

Despite these pressures, the firm’s business and staffing levels were largely unimpacted by the pandemic, she says. An annual salary increase was postponed from July to later in the year, “but we kept all our people and we had no salary reductions. So from a staffing perspective we have managed very well.” 

Given the more extreme lockdown in Melbourne, Ms Matthews says the firm focused on how to best support its people there. “We made sure they remained connected with each other and the rest of the firm, and that they were looking after their mental health.”

But even in Melbourne, the firm has had a strong year, she says, and productivity stayed high throughout the work-from-home period. “We actually had to make sure our people in Melbourne weren’t working too hard and burning themselves out, because the temptation was to work every hour when there wasn’t much else they could do.”

As workplace restrictions have eased in Melbourne, everyone now has the opportunity to go back to the office. But under the firm’s Work Smart Plus arrangements, staff can also continue to work from home a couple of days a week. “In all our offices I think we will see people working in a more flexible way over the years to come.” 

That has put the nature of the office workplace into a different light, she acknowledges. “Going forward, what we’ll see is law firms looking to use space in a different way. We may not see a significant shrinkage in the floor plates we have, but we may be configuring that space in a different way so that it allows for more flexibility of use and encourages more collaborative environments.”

Ross McClymontAshurst, Ross McClymont

Ashurst Melbourne office managing partner Ross McClymont says that after a strong start to the year he is feeling “cautiously optimistic” about 2021. “Given the amount of liquidity in the economy, and the distressed opportunities created by the pandemic, our corporate team had an extremely busy year and that shows no signs of letting up in 2021.” 

That optimism has fed into a significantly increased bonus pool this year, which Mr McClymont says “reflects the contribution of our staff during a difficult 2020 and consistent with our high performance culture”. Australian staff will enjoy with staff across the globe a special one-off bonus payment of the local equivalent of £1000 (A$1800). 

There was no formal hiring freeze, no direct impact on recruitment of clerks this year or last, and 19 new partners were appointed. The freeze on salary reviews set at the beginning of the pandemic was reviewed in November last year, and there was the usual salary review at the end of April 2021. 

That positive result extended to the Melbourne office he says, where there were two internal partner promotions and four lateral hires in Melbourne last year. 

“Obviously the lockdown in Victoria was deeper and longer than in other states,” Mr McClymont says. “We placed a particular focus on engagement and health and wellbeing during this time, including organising virtual office afternoon teas, online health and wellbeing seminars, regular check-ins with staff, and a virtual holiday program we organised during the September school holidays for our staff with young children.”

Flexible working arrangements were already in train before the lockdown arrived, Mr McClymont says, with a number of initiatives introduced to encourage flexible and remote working as part of its “Smarter Working” initiative. 

“This meant we were very well placed when lockdown happened. We have also announced a move to a permanent 60/40 framework going forward, meaning that the expectation is that our staff (client needs permitting) will only be in the office around three days a week. We have seen clear evidence over the last 12 months that we have the structures in place to ensure that remote working works for us, our clients and our staff.”

The firm is scheduled to move to its new office at 80 Collins Street, where its fitout will reflect the fact that no more than 80 per cent of staff will be in the office at the same time, Mr McClymont says. 

John McPhersonArnold Dallas McPherson, John McPherson 

The regions may not have been subject to the same strict stage four restrictions as Melbourne, but Arnold Dallas McPherson principal lawyer John McPherson says the pandemic nevertheless had a significant effect on the firm’s Bendigo office.

Like their city counterparts, the 20 lawyers in Bendigo could not work from the office unless it was impracticable for them not to, he says, “and it was a heck of a challenge making sure we had the infrastructure so people could work from home”. Fortunately, the firm had already been moving towards a digital office and could access all their files wherever they might be. “But people were still under stress and pressure and strain, with concern for family and friends and frustration that plans were unable to be fulfilled.”

Business took enough of a hit to revenue during the depths of the lockdown to make the firm eligible for JobKeeper for a quarter. That has bounced back since, partly because personal injury matters have a long lag time which means the full impact of the lockdown on his business may not be felt for some time. 

Although the firm has not had to put off staff so far, “whatever aspirations we may have had of taking on any new staff or new positions were put on the back burner because we had enough on our plate in dealing just with the challenges of having sufficient income and work to pay the people that were already here,” he says.

But existing matters have kept ticking along, for which he pays tribute to agencies such as TAC and WorkCover, the panel solicitors and the courts for their efforts in ensuring that matters “didn’t come to a screeching halt. Those institutions were right on the front foot using technologies like Zoom and WebEx to facilitate continued case conferences. The courts worked really hard and people came up with some creative solutions to the problems that existed.”

While that has been a godsend for now, Mr McPherson is apprehensive about the possibility that virtual hearings could continue indefinitely. “They have their place for things like directions hearings or mentions. But there’s an anxiety on the part of regional practitioners that video courts are the thin edge of the wedge. When it comes to the substantive determination of people’s rights, whether it’s civil law or the criminal jurisdiction, lawyers have an instinctive aversion to that being done virtually.” 

With regional firms permitted to return to workplaces since late last year, no one in the office is now working exclusively from home, Mr McPherson says. But the flexibility that was introduced last year will remain, he says.

“At the end of last year we did an internal survey about what people thought was worthwhile preserving from this whacky year. And people said they were keen to return. But they were also keen to institutionalise a day or two working from home. And we’ve been all ears as to that. People proved they could do the work from home and so why should the employer insist on people turning up just for the heck of it?”

JT Lawyers, Joey Tam 

Even before the lockdown, JT Lawyers was all ready for remote working after principal lawyer Joey Tam wanted to ensure she could stay connected with the other seven lawyers in her two Bourke Street offices while she went on maternity leave for a year. 

“Then there was the talk of potential shutting down because the pandemic was spreading. So we did a trial run with the gadgets and technology to see if it worked and that was the week right before everything shut down. That meant that when it hit,we were all set up and were able to roll with the punches.”

With staff all successfully linked up to each other and the firm’s servers, the next priority was ensuring the firm’s clients, many of whom have English as a second language, didn’t feel abandoned. There was some initial hand-holding while staff helped clients set up the videoconferencing app, Ms Tam says. “Once we got that happening, the arrangements actually worked much better for many of them because they could talk with us and even attend hearings from the security of their own homes.”

Business did take a bit of a dive early on, with commercial transactions and property matters put on hold. With court hearings put on adjournment, criminal matters also came to a halt. “But there was an increase in family violence and family law matters – and wills and estates increased because everyone was suddenly worried about their future,” Ms Tam says. 

“But migration was hard hit, and that’s a big part of my practice, so that was a worry. Although there were other problems in migration, with a lot of people having their visas cancelled or needing to have them renewed so that created new lines of work.”

JobkKeeper was a lifeline that meant not only did Ms Tam not have to stand down any staff, but was also able to offer payment arrangements to her harder hit clients in the tourism and hospitality industry. “That gave a boost for the firm to continue with confidence because (before that) we were a bit scared and morale was a bit lower.” 

And then as the second lockdown eased up, business started picking up. Residential property has been booming, and inquiries regarding commercial property leases are picking up. “Surprisingly, restaurant businesses, which we thought would really struggle, have done okay – particularly the ones that were able to convert to takeaway and delivery options.” Bankruptcy matters are still on the rise, as are family law matters, but she expects migration to slow down significantly for the foreseeable future.

Business has been so healthy that Ms Tam is looking to hire another lawyer and is revisiting plans to establish a branch in Maribyrnong. Another planned office in the Eastern suburbs is on the backburner. “I'm a bit wary that as soon as I hire someone, things might quieten down again, so for now I’m being cautious.”

But presuming business continues as is, she is planning to lift last year’s moratorium on pay rises. “Everyone has been working hard and they deserve it.”

Laura VickersNest Legal, Laura Vickers

For a law firm that draws half its business from property conveyancing, last year’s lockdown restrictions on on-site auctions and inspections initially put a big dent in Nest Legal’s revenue. But principal lawyer Laura Vickers says the six-week hiatus was “blissful”. “As a conveyancer the only real break you normally ever get is seven days between Christmas and New Year,” she says. 

Eligible for JobKeeper because of that initial hit, the firm used the unexpected downtime to attend to its precedents and processes, update website content, and create new intake forms for areas of law that had been increasing in recent years. 

The rest of the time was spent calling clients and “asking them, ‘how are you feeling at the moment, what do you need from us?’” Ms Vickers says. “And sometimes we were talking people down off the ledge, giving them the confidence that we would find a way to help them and get them what they needed.” 

The business, which currently has 17 lawyers across two offices, has been set up for remote working for years, so apart from buying cables and setting up extra monitors, the technological transition to working from home was relatively smooth. It was “the humanity of the situation” that was trickier and required extra hand-holding, she says. “We had some staff who were home-schooling four children, and others who were home alone and couldn’t see their family for weeks.” 

As Melbourne settled into a new COVID “normal”, the other half of the law firm’s business – wills and estates and family law – kicked back in to supplement the briefly subdued property side of the business. “Because we had those three relatively diversified areas of practice as a business, we could ride it out. So we didn’t have to lay anyone off, we didn’t cut anyone's pay, and we didn’t not hire people we said we were going to hire.”

And then, even while Melbourne was still in stage four lockdown, the property market started to roar back into life. “It started to get crazy busy and we hired a new senior conveyancer because we could see what was going on with the market, we were getting requests to prepare contracts so that properties could be sold the second we came out of lockdown.”

Aware that the booming conveyancing business is as much a result of an over-hyped property market artificially stimulated by low interest rates and stamp duty concessions, Ms Vickers is not sure things are back to “normal” yet. 

Even so, the firm is back to full business, with a scheduled move to a new bigger office in the next couple of months. “If we’re working to a model where people are working sometimes from home and sometimes from the office, then the office should be a genuinely collaborative and nice place to come to work, so this new office is all that. It’s a lovely place to come, a lovely place to share ideas, there are quiet zones, there are shared collaboration zones. It’s a nice place to have drinks on a Friday night. It’s all the things we want.” ■


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