Firm Spy Editorial: AAR’s Puoyan Afshar & “Making a Meal” Out of Billable Units

The Standing Ovation

It was to a standing ovation that the recent comments of outgoing NSW Young Lawyers Association President, Puoyan Afsharn, were read out at a Firm Spy board meeting over the weekend. In a manner best witnessed in cult American teen flicks like Bring it On, members of the FS inner sanctum punched the air, whacked seats and uniformly chanted “ashfar AFSHAR!!”.

Coles making a meal out of it

Afshar’s comments, you see, are something of a flashpoint between a judiciary which is now calling for an end to unethical billing practices by major commercial law firms, and the corporate firms themselves who, until now, have largely sought to preserve the billable unit because it is so lucrative.  He commented to Lawyers Weekly:

“From my position, I get a good sense, every once in a while, of what’s not right,” he said. “In commercial law and litigation, I think the pressures on young lawyers come from the billable hour. There hasn’t been much of a discussion in the past – not in any sort of depth that you would want – about the billable hour and the effect it has on staff … It is not the only thing, but that has an effect on peoples’ mental health.”

But Mr Afshar, despite speaking with his “presidential” hat on, has changed all that. Mr Afshar is the first junior lawyer working at a major commercial firm that we’re aware of who has openly protested against the billing practices of corporate firms (including his own former firm – Allens Arthur Robinson). He is also the first such lawyer that we’re aware of to argue that the billing practices of corporate firms (including his own former firm – AAR) contribute to the rife depression that pervades the legal industry. His courage in doing so deserves our applause. Hat tip, comrade.

Afshar also observed that some of the mental issues facing young lawyers are the result of insufficient developmental opportunities within their firms:

“The advent of large-scale litigation is … really causing some problems for young lawyers, where their development is hampered by working on large teams where they are only dealing with really small aspects of that case, where they do not develop as lawyers,” he said. “We go through five or six years of university, we go through College of Law, we go through all of the things we need to do to become a lawyer, and yet after that, all we are [is] document reviewers. There needs to be some thought given to the potential of young lawyers and the fact that we are lawyers, we’re not just clerical staff. We have been trained to do a particular job, and once we step back and see that in perspective, then I think the lives of young lawyers will improve…It’s about giving people who are, by nature, driven, the opportunity to learn and develop. If they’re not, their sense of self and satisfaction with their work will drop … and that’s what leads to problems.”

The Judiciary on Billable Units

Firm Spy agrees wholeheartedly with Mr Afshar. The Judiciary agrees too. Recently retired Victorian Supreme Court Justice David Byrne also agrees that AAR’s billing practices in particular should be debated. The Age interviewed Justice Byrne in May, and noted:

In a case that still makes Byrne seethe, he lambasted Allens Arthur Robinson’s $3.7 million bill for costs in a case that ran for six years before it went to trial. The final bill was expected to hit $8 million, but this sum could not be recovered anyway because the opposing party sank into receivership. At the time, Byrne described AAR’s bill as “a great reproach on the legal system” and said “some restraint, some proportionality and perhaps less greed should be shown”.

But his Honour didn’t stop at rebuking AAR for the greed involved in the case; he went onto highlight how lawyers like those involved in this case are able to exploit an ethical conundrum that emerges in a billable-unit fee structure:

“The cost [of commissioning lawyers and litigating] is just appalling, and we have made considerable efforts to reduce it…there’s no incentive in our cost structure for lawyers to be more efficient. You depend so much on their own integrity that they will not just make a meal of it.”

Just a few weeks ago, the Chief Justice French of the High Court also chimed in on the issue:

“I am old enough to remember a time when lawyers did not fill out timesheets,” he said. He said it is seen in some quarters as “an encumbrance on professionalism, placing a premium on inefficiency” and welcomed debate to look at alternatives.

Meanwhile, another eminent Australian jurist, Chief Justice of the Supreme Court of Western Australia, Wayne Martin, recently said:

“It’s time to have another look at alternatives to time billing. There are some serious problems with time billing. It rewards inefficiency, it encourages lawyers to spend more time, it doesn’t focus on value and outcomes and so I think there are more efficient ways of lawyers charging for their services.”

Which gets us back to AAR, the comments of Afshar, and whether, as queried by Justice Byrne, clients can rely on the integrity of corporate law firm partners to conduct litigation expeditiously so that they won’t “just make a meal” of it at the expense of clients and junior lawyers — in particular, their work-life balance, personal and professional development, and mental welfare.

So how does the AAR partnership ensure that the development/work-life balance/mental welfare of junior lawyers (not to mention the costs incurred by the client) aren’t compromised by its ability to “make a meal” of major work through the billable unit?  Let’s take a look.

AAR & Integrity

AAR made a recent announcement that it would be implementing a “performance pay” regime. At the time of this announcement, Mr Ashfan took another wholly courageous stand in his presidential capacity. In the article profiling AAR’s looming performance-pay structure, Afshar was quoted by the AFR in the following way:

Performance pay solely based on KPIs would result in lawyers working many more hours … This would leave the door open for the billable unit to increase its domination over lawyers’ lives. Work life balance is a key issue for junior members of the profession, with many jumping ship after two to five years, citing burn out and depression as reasons.

A performance pay regime doesn’t categorically shed light on the level of AAR’s integrity, but rewarding lawyers for billing clients more will only exacerbate the issue cited by Justice Byrne that “there is no incentive in our cost structure for lawyers to be more efficient.”

More compelling on the issue of AAR’s integrity, however, is the allegation directed at AAR that during the GFC, young lawyers were surreptitiously taken into interview rooms, presented with resignation letters, and invited to leave the firm for a payout on the spot, or to be pushed out later without a payout. The AFR reported:

Allens has previously said that performance reviews are not being used as redundancy by stealth, but lawyers at the firm say that is not the case. One lawyer says staff were told the firm was locked into its lease and the only factor that could be adjusted was people. Many Allens lawyers were called into a meeting with their partner only to be presented with a resignation letter and told to go now with a payout, or be pushed later with no payout, the lawyer says. He cannot reveal his identity because in order to receive the payout, he had to sign a deed of release promising he would not leak any information about the firm, “and if we did, they would hunt us out and sue us”, he says. The difference of 70 lawyers between the 108 lost by the firm last calendar year and the 38 or so that are accounted for under the voluntary redundancy program, was done by “stealth”, the lawyer says.

Whatever happened to integrity?

the $10 meal that costs $30
And then there are the rumours that pressure was placed during the GFC on some partners to give draconian performance reviews to staff to justify lower-than-warranted pay rises. An anonymous AAR spy sent us the following comments:

Allens Arthur Robinson’s management are aware that legal salaries across all levels are below market rate (although this has not been acknowledged or communicated to staff). At some levels, the discrepancy is as much as 20% below market rate. Salary compression at junior levels is also critical. “Thawing the salary freeze” offers the opportunity for the firm to consider a revision of its approach to remuneration. This may result in changes to the calibrated lock-step system currently in place. After the introduction of a forced-rank distribution sytem for performance reviews in 2009, the firm “successfully achieved its distribution curve”. (ie the firm reduced the number of staff achieving an “exceptional” or “very strong” rating and increased the number of staff who received a “strong” or “underperforming” grade). Some partners complained that they felt compelled to impose a grade on staff they did not agree with. Lawyers complained about flaws within the calibration system itself, including the fact that lawyers might be disadvantaged if they did not have someone to “champion” them during the calibration process (ie if they do not work directly with a high-ranking partner).

If these allegations are truthful, then, when profit is at stake, AAR partners are variously prepared to give harsh ultimatums to staff and to manipulate performance reviews. So when profit can similarly be increased by lowering efficiency through the billable unit, notwithstanding that it might seriously affect the development/work-life balance/mental welfare of junior lawyers (not to mention the costs incurred by the client!), do you think the AAR partnership has the integrity not to just … “make a meal of it”?

The High Cost Paid by Junior Lawyers

It is easy to see why Mr Afshar has taken his presidential stand. Junior lawyers in major corporate firms across Australia are forced to suffer through mind-bending hours of non-professionally developmental work. At AAR, as this post alleges, they might do so with a pall hanging over them that “they could be the next person dragged into a meeting room and invited to sign a letter of resignation”. Even if they are regarded as exceptional lawyers, then, if our anonymous spy is to be believed, there is a chance that they will still be given a lower-than-warranted pay review so that the partnership can justify giving them lower pay.

Does this strike you as the sort of toxic cocktail that might induce a high-achieving graduate, who has already suffered through 5 years of competitive university studies, to develop a mental issue?

We think so. We think it is time for the industry to change. Not just at AAR (we could easily have used another major firm to make a similar article) but all firms.

But would corporate partners prefer to see the preservation of this diabolical billable-unit matrix that ensures high profitability, high junior lawyer turnover, and the perpetuation of the mentality that “because I suffered through it, so must all those behind me”?  Or is there a change-agent?  If so, who?

We invite corporate partners to cook up a new receipe, instead of just making a meal out of all the old ingredients.

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