Prepare for Regulator Scrutiny of Law Firm Culture on Diversity

18 July 2021

This article was first published by Law.com ,  you can also read in full by clicking here.

The Black Lives Matters movement has prompted various law firms to reconsider their approach to creating a diverse and inclusive workplace. Some City firms have pledged new targets and others are investing in new forms of positive action, internally and externally, to address the underrepresentation of ethnically diverse  individuals in their workforce.   

As well as the moral dimension, there is undoubtedly reputational pressure on law firms to make progress in this area. However what of the regulatory obligation that exists under Section 1 of the Legal Services Act 2007 to encourage an “independent, strong, diverse and effective legal profession”?  How likely are we to see this being a priority for scrutiny by legal regulators going forward?

It is, of course, not beyond the realm of possibility that we could see individual lawyers facing sanction from the SRA (as well as the Employment Tribunal) if they are found to have promulgated racist remarks or blocked promotions or hiring decisions on the basis of race or ethnicity. But that has always been the case. More importantly, the SRA now takes the culture of the organisations it oversees very seriously.  We have seen this under the spotlight in various recent #metoo related cases and it follows that the SRA will take action if firms have a toxic working environment as far as racial diversity is concerned too.

Since the introduction of the SRA’s new regulatory regime in November 2019, including a new Code of Conduct for firms, underpinned by a previously launched revised Enforcement Strategy, the onus is now very much on law firms to create and maintain a good working culture. The SRA’s shift in focus is about firms increasing awareness of their ethical obligations and this includes fostering an environment that is diverse and inclusive and where all individuals feel respected and supported. There is a responsibility not only to have EDI initiatives that tick a box but also for firms to act in a way that encourages equality, diversity and inclusion (EDI).

This means managers need to promote these values in their firm and the responsibility extends to identifying and removing barriers, for example in recruitment, promotion and progression.

In around the Spring of 2020, the SRA launched an interactive diversity tool and set out its key findings in respect of diversity within law firms based upon data collected from the summer before. The tool has a number of useful filters to compare statistics relating to various diversity categories, including comparisons of the data between firms of different size, work specialism and geographical location. Data which is due to be collected by firms imminently in July 2021 will most likely be fed into this interactive tool.

This is one way the SRA intends to monitor where problems lie and identify firms where it needs to ask questions.  The LSB requires the SRA to collect, report and publish diversity data about their regulated firms every two years. Management behaviour, training and mentoring as well as recruitment and promotion procedures are also likely to fall under their gaze.

So law firms have no excuse on all fronts for not improving their record when it comes to ethnically diverse representation.

They need to be seen to respond to the #BLM movement in the interests of their employees and in the eyes of their clients. They need to ensure they take steps – now - to protect against discriminatory behaviour from an employment law perspective. However, they have regulatory obligations too which go beyond mere compliance and minimum legal requirements. Inclusion and diversity are fundamental components of promoting an optimal workplace culture which is a hot topic for regulatory scrutiny and potentially enforcement action, where necessary, by the SRA.  

FURTHER INFORMATION

If you have any questions or concerns about the content covered in this blog, please contact Jessica Clay or a member of the Regulatory team.

 

ABOUT THE AUTHORS

Jessica Clay is a Senior Associate with over a decade’s worth of experience specialising in legal services regulation. Jessica’s work in this sector focuses  on advising law firms and other regulated individuals  in relation to complying with regulatory obligations, better understanding the importance of legal ethics within regulation, regulatory investigations and public law matters, including reviewing regulatory frameworks and decision making processes.  

 

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