If you keep abreast of your legal news like we do, you’re probably familiar with the major recruitment drive of HWL Ebsworth. In the last two weeks we have counted no fewer than 5 new additions to its partnership from rival firms, building on the remarkable partnership growth of the firm over the last couple of years.
Indeed, according to the AFR (25/6/10) in the six months to July 2010, HWL Ebsworth increased its partnership by 5.7% through the market-defying appointment of 23 partners. Year on year, the HWL Ebsworth partnership increased by 7.8%. Non-partner fee earner headcount also grew (by 8.8%) in the six months to July 2010 (AFR 2/7/10) – again, all while the market around the firm was falling.
Chief executive partner Juan Martinez told The Australian just a couple of weeks ago that HWL Ebsworth has no plans of slowing down either, commenting that:
the firm has future plans for growth.
So with all this growth, partnership announcements, and the generally positive vibe emanating out of the place, there should be no need for Firm Spy to pick up the magnifying glass, right?
WRONG.
Today’s post takes a look at the apparently oppressive tactics the firm is using to exact vengeance ensure employees departing HWL Ebsworth repay the firm for any subsidies received in respect of further study expenses incurred whilst working at the firm.
And it’s bad. Its macabre.
Thanks to the HWL Ebsworth spy who sent us the following email:
Dear Firmspy
I am writing in after receiving a rather offensive letter from the firm that I am about to leave, HWL Ebsworth, regarding the reimbursement of study that I undertook while employed.The letter reads as follows:
“Please find enclosed a tax invoice regarding the reimbursement for payment of your post-graduate studies as per the obligations and responsibilities associated with your [INSERT COURSE NAME HERE] and accepted by you on [INSERT DATE HERE].”
The reverse side of the letter is the tax invoice which has the following statement:
“**Full payment is due prior to departure”
The letter was not personally signed by HR but simply had a computer signature inserted.
Now I want to be upfront and say that I understood that I would be required to reimburse the firm, however I would have thought that the firm would have taken into account a number of factors in deciding whether to enforce this aspect of our agreement:
1. HWL Ebsworth got the benefit of those courses for a number of months; and
2. I am not leaving to go to a competitor.
Nor do I propose that the debt be completely eliminated. I am open to reasonableness, something which HWL Ebsworth clearly has no regard for, and would be happy (ok maybe not happy, but I will do it) to pay an amount pro-rata. I also note that nowhere in the letter I signed, in which I agreed to reimburse the firm did it state that I would pay the amount prior to departure. Another aspect which I feel is a little over the top.
To be honest I am disgusted by HWL Ebsworth’s attitude to its junior staff (and even some senior staff). I have a number of colleagues who have left HWL Ebsworth and the opinion is all the same – no one will ever go back and those that have gone in-house will never refer work to the firm. It saddens me that a group of very proficient lawyers are being tarnished, due to their association with the firm, because the management of the firm cannot see the forest through the trees.
I am curious as to what other people have done in the same situation and what other firms’ practices are?
[NAME REDACTED].
In subsequent correspondence, the HWL Ebsworth spy stated:
I want to reinforce that there is a contractual obligation to reimburse the firm for the full amount. My issue is that there is no requirement to reimburse in full in the tertiary studies acceptance letter. and that I think it is completely arbitrary to ask for full payment even though the firm got the benefit for a number of months. I should also point out that HWL also requires staff to pay a figure for the remaining part of their practising certificate (although they seemed to have overlooked this part with me). I also note that HWL no doubt obtains the tax benefit of paying for an employee’s study – even though I am obliged to pay the firm and so do not get the benefit of this payment for my own income assessment.
Yes, that certainly is a weighty slice of flesh, so let’s break it down loin by loin:
- benefit of the increased charge-out rates and the internal know-how of lawyers with a better education;
- the “on-the-face-of-it-cost” which the employee see the firm paying for course fees (cf the after-tax cost actually paid by the firm – we’re not sure how material the difference is here, but it could be);
- reimbursement of full “face” cost to firm; and
- something amounting to a lien over the relevant employee’s wages pending full reimbursement pre-departure.
Unconscionable, anyone? For the budding contract lawyers among us, have a close read of the Tertiary Study Acceptance Letter also sent to us by the HWL Ebsworth spy:
Dear [REDACTED]
Application for support of post-graduate study: obligations and responsibilities
Pursuant to HWL Ebsworth’s Professional Development Policy and the firm’s philosophy of encouraging further personal and professional development, the firm is pleased to support you in undertaking of the [INSERT COURSE NAME HERE] at [INSERT INSTITUTION NAME HERE].
We undertake to pay the fees associated with the course. There are a number of obligations and responsibilities as described below which form part of the Professional Development Policy. They are as follows:
1. The cost of [INSERT AMOUNT] for the [INSERT COURSE NAME] will be borne by HWL Ebsworth. However, any additional costs such as textbooks and so forth will be borne by you.
2. Should your employment cease whilst completing the course of study or within 12 months of completing the course, you will be expected to refund to HWL Ebsworth all course fees borne by the firm.
If you accept these terms and conditions please sign at the bottom of the page and return to Human Resources.
Yours sincerely.
HWL Ebsworth
Hardly the sort of watertight contractual drafting we would expect from an emerging national law firm. This led us to ask HWL Managing Director Managing Director Juan Martinez what his thoughts were:
——– Original Message ——–
Subject: Reimbursement of Study Costs
Date: Mon, 14 Feb 2011 05:29:57 -0500
From: news@firmspy.com
To: juan.martinez@hwlebsworth.com.au
Cc: sarah.callinan@hwlebsworth.com.auDear Juan,
In 2011 we’re doing things a little differently; we’re contacting firms in relation to allegations we hear so that the relevant firm can comment (if they want to) in our subsequent post. No, we’re still not journos, but we’re doing things a little bit more “by the book” this year.
With this in mind, we wanted to raise an issue that has been brought to our attention with you directly. We intend to publish a post on it this week.
That allegation is that departing HWL Ebsworth employees who have made use of the firm’s further education subsidisation policy are being forced to either completely repay those expenses pre-departure or agree to a draconian repayment program.
Further, in the event that they decline either option, the relevant employees are having their final payment from the firm withheld, despite the firm having no contractual right to do so. We would also ask in your reply to confirm whether it is the firm’s position that the following language creates a legally enforceable obligation under the principles of Australian contract law:
“you will be expected to refund to HWL Ebsworth all course fees borne by the firm.”
We look forward to a response at your earliest convenience.
Regards,
Firm Spy
We received no response from Mr Martinez. Perhaps he was too busy devouring flesh?
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I have never heard many good things about HWL Ebsworth (and my suspicion is that the new partners are primarily comprised of partners pushed out by other firms) but I don’t particularly see a problem with this.
Every firm does it – some are perhaps a bit smarter in relation to when they enforce it, but this is par for the course (sadly). The lawyer in question is perhaps a little naive in assuming that a law firm will act reasonably on these matters.
Can’t see the issue here. He/she agreed to repay and is now being asked to repay…
Sure, the firm got some benefit from the course (although in my experience, further education generally has little to do with actual practice, but helps pad out a CV), but where’s the issue?
I agree with nasty cyril – I can’t see the issue with this at all. In my experience, it is entirely standard requirement to repay course fees if you leave the firm within a pre-determined period of time. As to the tax benefits, whilst HWL would have claimed a tax deduction at the time the payment was made, the reimbursement by the employee would be, in effect, assessable income in the hands of HWL thereby cancelling out the tax benefit received by HWL. Further, the ‘gilted’ will now be entitled to a tax deduction for the expense (albeit paid to HWL) in respect of the course fees (being in the form of a deduction for self education expenses).
Frankly, I think HWL is better off without this person.
Some of the stuff in the above post doesn’t make sense. “there is no requirement to reimburse in the acceptance letter” – clearly there is
There is an “expectation” DJ, not a contractual obligation. I think witholding salaried from staff is the issue NC. It is like the firm thinks it has a court order or something!!
Same thing happened to me when I left a big 4 accounting firm but it was for CA fees. Difference was they actually did withhold my pay and the first I heard about the debt was an email from the outsourced hr team in India that not I still owed a further amount!
I wasn’t happy.
i bet the firm also has the “expectation” they will be referred work from former employees who go to industry, guessing not in this case. hope the firm thinks whatever the cost of the study was is worth the potential business…..
Hwle?! Haha!
#Dave
1. The benefit derived from claiming the study as a tax benefit is 100%
2. The tax that HWL will pay on the income received from their ex-employee is far less
3. The employee will not be able to claim it as a tax deduction as it is not a “study related expense” given that they are reimbursing their former employer
That place sounds like the pits… Now every young lawyer will think twice.
#cranks
I bet you they are regretting it 1,000,000 times over – forest through the trees baby!!!!
This is not the first time HWL have done this.
At one end HWL has grossly underestimated the long term effects of their treatment of staff. At the other they’ve abused their power in relation to employees – unconscionable contracts are not a first for HWL nor is their ignorance of workplace laws. It would be one thing if it was simply the ignorance of their HR department but its another when their actions show the ignorance of partners as well. Unfortunately, it is highly unlikely that Mr Martinez has been briefed on the extent of these actions.
To those that feel this is acceptable practice it is important to note that there are right and wrong ways to go about the recovery of payments. If employees of HWL or any other business are experiencing similar issues it is a worthwhile exercise to seek independent advice. If the cost of that is probative remember the Fair Work Ombudsman is set up to handle complaints of this nature – maybe that’s exactly what HWL needs to get their act in order.
The real question is, if this is a firm that can’t run its own operations within the boundaries of the law, how can its client’s expect any value?
No prizes for the guessing who the HWL flunkies are above!
To be fair though, there are plenty of firms who don’t pay for further education at all. A particular firm – which is now regarded as top tier – didn’t pay for College of Law fees, but gave grads an interest free loan, paid back (out of post tax income) over 12 months.
What is more interesting is the composition of the new (partner) HWLE recruits, I think. I understand they are either long term top tier Senior Associates/Special Counsel who have a snowball’s chance in hell of making partner in their current firms or partners that have been booted out of top tier firms for various reasons – usually because of their unprofitable practice or because they are utter nutbags (or both).
Are you guys serious? I can’t think of a firm which doesn’t make you repay fees if you leave within a certain time frame. stop singling out one firm for it.
also, It’s in plain bloody English in your contract. have a cry and get over it.
Haha, HWLE is cheap. They don’t have HWLE branded ‘with complements’ slips, umbrellas or even supply tissues to staff… I’m afraid to walk around as my face might spontaneously explode due to a compulsive sneezing habit I developed from the mildew growing in my office.
“Not going to a competitor” – so this guy is unemployed, got fired and Centrelink refused to bail him out. If he was in the Army, they’d make you go to ‘Nam to work off his debt. Boohoo, get over it and pay the damn fees. Or not, you know they’ll sue you for it.
HWLE runs a good practice if you’re at the top. If you’re at the bottom, shut up, do your work, steal the free biscuits and sell them on Ebay to pay your damn study fees when you leave / get fired.
The Other Side
I think you have missed some fundamental principles of accounting and tax in your reply to my comment.
I will illustarte it with an example – say the course cost $100 and say that an HWL service trust incurred the expense and had a marginal tax rate of 30%.
HWL would have claimed a tax deduction in respect of the course fees of $100 that it paid on behalf of the employee. The $100 is thus deducted from HWL’s taxable income, resulting in a tax saving of $30.
When it reclaims the $100 from the employee, HWL records an additional $100 in assessable income (on which it then pays tax – of $30).
From HWL’s perspective, the transaction is a wash – the deduction initially taken is offset by the subsequent receipt of ‘income’.
I also disagree with your comment that the employee won’t be able to claim a deduction herself. He/She has now incurred an expense that relates to self education. That she has merely paid the money to HWL rather than directly to the course provider is, from my perspective (as a humble accountant and lawyer) irrelevant. They are reimbursing HWL in respect of an education-related expense; the expense would be deductible for the employee had it been paid directly by the employee – that it is being paid for indirectly does not change the nature of the expense. incurred.
I don’t work for HWL (and I agree they do sound a tad cheap) so I’m no trying to push any particular barrow. But this employee can’t be serious – as Duke (and others) have said, what employers don’t require this form of expense reimbursement.
Besides my comment above, Cranks is right.
All things are not equal.
If the employee is leaving to go to Mallesons or Minters etc then sling him with the reimbursement.
If he is going to industry then waive it – this is marketing 101.
Even if he owed $10k, what are the chances that in the next 36 months the firm will get some sort of work from the employee? $10k doesnt go far in litigation these days… thats like 1 statement of claim (or defense) and a few motions.
When will firms (accounting and law) learn that the juniors that get p#ssed off today are the instructing in-house legal counsels of tomorrow.
Marketing 101 people.
I think this is the least of HWL’s problems, but it doesn’t help it’s marketing for or retention of staff.