Washington State Bar Association to appeal ending of LLLTs

The Washington State Bar Association is set to seek review of the state Supreme Court’s decision to end the limited licence legal technician (LLLT) program in the state. At the LLLT board meeting on June the 8th the board decided to request the Supreme court review the decision or at least provide longer for those currently training to complete their licensing requirements.

The review comes in the wake of the June 5th decision by the Supreme Court to “sunset” the LLLT program. The court felt that the costs were too high for the limited participation in the program, and ruled that all those aiming to become licensed must do so by 31st July 2021.

The LLLT program is the first of its kind in the USA and is aimed to help provide affordable legal services to the broader population in the state. LLLTs are licensed by the Washington Supreme Court to advise and assist people going through a divorce, child custody, and other family law matters, the aim had been to expand these practice areas. LLLTs consult with and advise clients, complete and file necessary court documents, assist pro se clients at certain types of hearings, and advise and participate in mediation, arbitration, and settlement conferences.

The Bar Association has requested that anyone who wishes to contact the Supreme Court about the decision should email  supreme@courts.wa.gov.

See the Bar Association’s comments.

See the Supreme Court’s letter announcing the decision (PDF).

See Justice Madsen’s dissenting opinion on the decision (PDF).

 

 

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Notes on the Westminster Legal Policy Forum keynote seminar – 25th February 2020

This ICLR special report has been compiled to give members a flavour of what was discussed during the annual Westminster Legal Policy Forum, held on the 25th February 2020. The theme of the day was ‘regulation, consumer protection and responding to innovation’, with speakers drawn from across regulators, representative bodies, academia and the legal services sector from across England and Wales. Further information about upcoming Westminster Legal Policy forum events, as well as publications from the forum, are available here.

The Independent Review of Legal Services Regulation – key issues to be addressed

Professor Stephen Mayson, Centre for Ethics and Law, University College London and Lead, Independent Review of Legal Services Regulation

The day began with a keynote speech by Professor Stephen Mayson outlining the progress of his hotly anticipated recommendations on legal services regulation. Professor Mayson took the opportunity to address some of the key issues that had arisen during the course of his research. Professor Mayson stressed that his report was written with the consumer as the primary concern, saying that given the scale of unmet legal need across England and Wales, it had become increasingly clear, both that the changes he will propose will be too radical to be achieved within the Legal Services Act 2007 (LSA) and that he increasingly views reform as something that will need to take place sooner rather than later.

Professor Mayson raised four key issues that he has identified under the current regime:

  1.  The vulnerable – Professor Mayson highlighted the vast level of unmet legal need in the country, saying that the law is too complex and too important for the level of access available. Professor Mayson also criticised the “unprincipled” nature dichotomy of high barriers to entry to deliver reserved legal activities, which are treated as essential until a consumer can no longer afford them, at which point the consumer becomes able to self represent.
  2. The dabblers – Professor Mayson also criticised the narrow entry gate to the profession, which allows a wide range of practice. He highlighted the fact that the simultaneous licensing of title and activity allows legal practitioners to hold themselves out as capable of delivering in areas in which they have limited or no competence and experience, leading to a lack of credibility.
  3. Buridan’s ass – Professor Mayson discussed the philosophical concept of Buridan’s ass, in which a donkey placed equidistantly between two piles of food is unable to make a decision as to which one to move towards and starves. He compared this to regulatory reform, suggesting that unless a decision was made on either moving towards risk-based regulation, or some kind of reworking of the existing system then reform would become paralysed by a lack of choice.
  4. The Gordian Knot – Professor Mayson highlighted that his report will raise many questions as to what an independent regulatory system should look like, however, he highlighted that the current system creates the artifice of the approved regulator, which holds an unclear position between being a profession focused representative body and publicly focused regulator. Professor Mayson suggested that the time has come to sever the Gordian knot between the regulatory body and approved regulator.

The full text of Professor Mayson’s speech is available here, with further information about the independent review of legal services available here.

The future of legal services – technology adoption, the changing shape of professional services firms and regulatory development

A lively panel discussion followed the keynotes speech, with panellists providing analysis on what they saw as key issues in the regulation of legal services

Neil Rose, Founder and Editor, Legal Futures – Mr Rose discussed some of the need for reform, pointing out that whilst the current system works well for some, there remain an awful lot of people for whom it doesn’t. Neil pointed out that the attitude in the sector still gravitates towards “we do things this way because this is how it’s always been done”. He raised the idea that the LSA has acted as a catalyst in allowing new businesses to come in and disrupt the sector, pointing out that concerns over compromised standards have not been fulfilled. Neil also pointed towards the new Solicitors qualifying exam suggesting that it could lead to seismic changes in the profession. He also pointed towards further reforms as creating the opportunity for the sector to further grow and develop.

John Gould, Senior Partner, Russell-Cooke; Author, The Law of Legal Services and Member, Advisory Panel, Independent Review of Legal Services – Mr Gould began by asking if there is really a need and an appetite for change. He then went on to describe how the current system has become something of a “lottery winners bungalow”, with many developments and aspirational additions tacked on, with no coherent whole. Mr Gould suggested that this has created a system where compliance officers have become a necessity as a go-between between lawyers and regulators, with the public completely excluded, with no clarity as to how the system works. He suggested that a clearer and more understandable system must be developed with the relationship between activity and title being clearly defined, to create a system that can function for the public, practitioners and regulators.

Duncan Wiggetts, Executive Director, Professional Standards, ICAEW – Mr Wiggets discussed how the distinction between lawyers and non-lawyers has become increasingly blurred. He suggested that for consumers of legal services costs had become a key factor in how purchasing decisions are made, leading to a convergence between accountants, lawyers and other business advisors. Mr Wiggets pointed towards the Brydon and Kingman reviews into audit and financial reporting, suggesting that these could inform the ongoing work of the Mayson review. He suggested that both these reports pointed towards the primacy of public interest and the need for risk-based regulation.

Kirsteen Forisky, Head of Innovations, LEAP Legal Software – Ms Forisky pointed out that changes in the legal environment have fundamentally altered legal service delivery. She pointed out that to remain competitive firms must begin to use technology, particularly cloud-based software, in order to improve their efficiency and information-sharing capabilities. She pointed out that this will enable firms to work in an agile way, meeting client demands in today’s business environment, allowing them to offer an enhanced client experience, without creating added pressures and costs on employees.

Derek Sweeting QC, Vice-Chair, Bar Council – Mr Sweeting discussed the risks present in opening up the profession. He cited current concerns over unregulated legal providers, raising the example of Paul Wright v Troy Lucas & George Rusz, citing the danger of unregulated provision. Mr Sweeting suggested that consumers prefer to rely on named professionals, who they can trust and rely on to provide quality services. Mr Sweeting suggested that the growing number of solicitors entering into the profession combined with increased public legal knowledge would meet the unmet legal need gap in a way that allowed people to place trust in the legal sector.

Chair’s closing remarks

Lord Gold

Based on the discussion throughout the morning Lord Gold took the opportunity to urge the Ministry of Justice to take action on simplifying the regulatory regime, highlighting the fact that unless there is political action, the profession will continue to debate and delay ad infinitum. The Conservative peer raised concerns over regulators ability to respond to technology and other challenges and said: “If you leave it to the brilliant lawyers we have in this country, they will obfuscate and delay and it will never happen … Now is the time for the MoJ to rip this up and decide what exact regulatory regime we need for the future.”

The state of the market – transparency, consumer engagement and reflections on the 2016 Market Study

Chris Jenkins, Economics Director, Competition and Markets Authority – Mr Jenkins gave his thoughts on the progress that had been made since the release of the CMA’s hugely influential 2016 study on the legal services market. He pointed out that in the initial study there had been a pledge to review the progress approximately every three years, and told the event that a review was planned for the second half of 2020. Taking a broad view Mr Jenkins suggested that tackling the issue of public ability to asses price and quality had not been fully addressed and that more work was needed on the issue to improve consumer ability to make purchasing decisions. He called for regulators to push forward on improving standards of transparency, making it easier to compare services and providers. He did point out however that there had been greater progress in implementing changes improving independence and regulatory transparency which had been a positive move, although he suggested that there was still more work needed in improving consumer redress.

The focus on consumers – public confidence, competition and managing ‘unmet legal need’

Simon Davis, President, The Law Society – Mr Davis discussed the findings of the recently published legal needs survey, which was produced by the law society in partnership with the LSB and YouGov. Mr Davis pointed out that the results of the survey suggested that when people did purchase legal services from a solicitor the vast majority were satisfied with the service and outcome. He pointed out that many consumers were unsure if their problem constituted a legal problem and therefore failed to seek advice. He suggested, therefore, that the solution in tackling unmet legal need was improving legal aid provision and increasing public legal education, to help consumers identify when they had a legal issue.

Dr Ashwini Natraj, Senior Economic Consultant, Consumer and Behavioural Economics Team, London Economics – Dr Nataraj outlined the work that London Economics has been doing on the relationship between behavioural economics and public engagement with the legal sector. She discussed some of the ongoing issues that exist in public decision making around legal services, highlighting problems such as the complexity of the market, stress purchasing, information asymmetry, and the infrequency of purchasing. She pointed out that this has led to low awareness of consumer protections, low confidence in the sector, particularly amongst vulnerable groups and difficulty balancing price and quality. She suggested that behavioural economics approaches could be used to improve engagement and understanding of legal regulation, particularly as there was a difficult balance between providing enough information to give consumers clarity, which has to be balanced against overwhelming consumers with a vast weight of information.

Mariette Hughes, Head Ombudsman, Legal Ombudsman – Ms Hughes discussed the role of the Legal Ombudsman in improving public confidence in legal services. She pointed out that as the last resort and last port of call the ombudsman is often the key touchpoint in maintaining public confidence amongst the most vulnerable and most challenging cases. However, she pointed out that there was still a presumption that the ombudsman would be able to provide consistent supply and quality, raising questions over the resources available to the ombudsman. She also pointed out whilst having a single ombudsman for the whole sector helps to improve confidence, there is also the risk that a single ombudsman can not leave some gaps, which must be met by specialised regulators to avoid damaging public confidence.

Rob Houghton, Founder and Chief Executive Officer, really moving and The Law Superstore – Mr Houghton discussed the role of price and quality comparison sites in providing consumers with resources to better understand the legal market. He pointed out that having resources to compare prices allows for greater influence of natural market forces over an opaque marketplace. He suggested that having greater price and quality competition could only stand to benefit consumers, as it would increase the information available whilst also pushing providers to improve the value proposition of their services, effectively creating a new way to sell their services on value and quality, allowing them to compete with larger organisations.

Julia Salasky, Founder and Chief Executive Officer, Legl – Ms Salasky discussed the role that technology can play in addressing consumer side challenges. She suggested that as expectations of a certain level of consumer experience increase, failing to meet this expectation reflects increasingly negatively on the profession.  She suggested that technology could provide an incredible opportunity for the industry to improve communication around value and transparency of products, which could go on to inherently improve public confidence in their legal purchases, and therefore public confidence in the law as a whole.

Regulation in the legal services market – structures, roles and independence

Matthew Hill, Chief Executive, Legal Services Board (LSB) – Mr Hill raised concerns over the fact that unmet legal need was still a major problem and that the legal market was not working for a significant proportion of the population and economy. He compared the current regulatory system to a chair with two legs, saying “You can sit on it perfectly comfortably provided a lot of people spend a lot of time holding it steady for you. We do spend a lot of time making independence work by investing time and effort in it.” Suggesting that the current system can be made to work and that further change can be wrung out of it, however, to truly create an impact there must be a wholesale change in legal regulation. He said “The existing system is undoubtedly complex. It’s built around professions and not consumers. For example, reserved legal activities and title-focused regulators make sense to regulators and sectors, but not necessarily to the public.” He suggested that whilst public legal education played a valuable role, it clearly had not significantly shifted public views on the sector and was sometimes used as a way of blaming the public rather than taking responsibility for change. He ultimately suggested that reform would have to come about at some point and should be built around meeting consumer needs first. Mr Hill also questioned whether, given the scale of some regulatory bodies, they were all fully able to deliver public outcomes.

Ewen Macleod, Director of Strategy and Policy, Bar Standards Board  (BSB) –  Mr Macleod agreed that change was needed to improve public confidence. He suggested that the greatest risk to consumers came about during the initial advice to consumers. He, therefore, suggested that the answer did not lie in creating further barriers, and instead lay in working to improve reputational issues. He said that through broadening the scope of after the event regulation, increasing access to the Legal Ombudsman and improving public information over how to access legal services, public confidence could be improved. He suggested that the board supported a greater focus on risk-based approaches, but that a title was necessary to provide clarity during purchase, suggesting that there is an issue over how risk-based approaches can map onto the public consciousness of existing titles and recognition. Mr Macleod also suggested that the BSB needs to be ready to respond to new developments in legal technology, in order to meet public expectation on the issue.

Chris Handford, Director of Regulatory Policy, Solicitors Regulation Authority (SRA) Mr Handford explained that given the fact that as of yet there have not been changes announced in the regulatory regime, therefore the SRA would continue to reform within the boundaries of the existing framework, stressing that the SRA was limited by decisions made at a government level and within the LSB, and within the confines of the LSA. He put forward several reforms that had been put implemented by the SRA, including rewriting solicitors standards to become more principles focused; work to increase trust and consistency, including exploring better quality indicators and ongoing competence; he talked about legal technology suggesting that there is significant potential in the area to improve access to justice, however, also flagging that the SRA must be alive to the potential risks technology could create. Mr Handford suggested that the direction of travel in the profession was towards increasingly blurred boundaries, with a lot of change coming, pointing out that regulators must be ready to embrace and act on this change in order to manage it and effectively fulfil their function.

Stuart Dalton, Director of Policy and Enforcement, CILEx Regulation (CRL) – Mr Dalton began by advocating strongly for the reforms being suggested by Stephen Mayson, suggesting that CRL could be ready to address much of the regulatory void that the report had identified, particularly around tech, helping to address much of the identified need, suggesting that under its current position CRL is already well equipped to deliver regulation around specific activities, given its current structure in regulation across the legal sector. Mr Dalton also took the opportunity to highlight CRL and CILEx’s strong commitment to regulatory independence. Emphasising that CRL has committed to achieving the highest possible degree of independence from CILEx as is possible under current statutory limits. He suggested that in the future regulatory independence, with a public focus would become the norm in legal regulation and that CRL would be leading the way towards this change.

Chair’s closing remarks

Rt Hon the Lord Falconer of Thoroton – Lord Falconer, the architect of the LSA gave his thoughts on the proceedings saying it was “apparent that the legal services market is not servicing the whole market properly and that market forces will not solve that problem”. He said that clearly the solutions had to come from a combination of regulators and public funding, pointing out that government buy-in is necessary to implement and initiate genuine change. The peer gave a nod to discussions about the complexity of the regime, as well as the growing role of technology, saying: “I am sure that there are things that could be done to improve the structure, but I believe that the structure is sufficiently flexible for the regulatory issues to be met. I am not that persuaded that a fundamental shift in the legislative structure is a good idea… but I do think one of the big problems is the failure of the state to provide sufficient legal aid and other forms of funding for advice that the market would not otherwise provide.”

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Law Society of Saskatchewan amends Legal Profession Act to expand access to legal services

The Law Society of Saskatchewan has announced amendments to the Legal Profession Act, 1990, effective from 1 January 2020. The Law Society is an independent regulator with the core mandate of the protection of public interest.

In 2017 the Law Society and the Ministry of Justice established the Legal Services Task Team, comprised of lawyers, member of the public and other non-lawyers working in legal services, as part of the strategic plan to increase access to legal services. The task team was asked to explore the possibility of non-lawyers being allowed to provide low-risk legal services.

The team’s recommendations included clarifying the definition of the practice of law, and identifying what constituted unauthorised practice of law; expanding the list of exemptions to the unauthorised practice provisions; and creating limited licenses that may be granted by the Law Society on a case-by-case basis.

Amendments to the Act which have been introduced include:  a clearer definition of the practice of law and allowing limited licensing, the first example of this approach in Canada. The Law Society of Saskatchewan Rules were also amended to include an expanded list of exemptions to unauthorised practice. The Law Society is attempting to identify further groups and individuals providing limited legal services, who are not lawyers, that may not fall neatly within the new list of exemptions.

The Society is hoping to encourage low-risk providers to self identify to be considered for exemptions, especially as the Society has historically not pursued low-risk providers. The Society feels that self-identification will allow for more effective management and regulation of such providers.

Further information about the reforms is available here.

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Key findings from largest ever legal needs survey in England and Wales

A survey has been conducted by YouGov on behalf of the Legal Services Board (LSB) and the Law Society of England and Wales, looking to examine the current state of legal need across the jurisdiction. A nationally representative sample of 28,633 members of the public was consulted on  34 different types of legal issues, in order to gather representative data. The survey found that six in ten adults (64%) experienced a legal problem in the last four years. Key findings from the report include:

  • High unmet legal need, with 31% of those who had a contentious legal problem which was resolved, not getting help, wanting more help or their issue taking longer than two years to resolve.
  • High levels of service satisfaction with solicitors, people demonstrated greater satisfaction with the service they receive from solicitors (90%) compared to 74% from unregulated providers.
  • Difficulty in searching for prices – 24% of respondents reported difficulty searching for prices.
  • Many respondents not paying for their services directly, 57% of people who obtained professional help from a main adviser did not personally pay for it – of those 49% obtained advice through a free service, 7% were funded by an insurance company and another 7% by friends and family.

The Legal Services Board Chair Dr Helen Phillips said:

People often need legal services at the most important times of life, and sometimes when they are at their most vulnerable. Whether they’re buying, selling or renting property, seeking redress following a poor service, or a victim of crime, everyone should be able to access professional support if they need it.

However, this survey reveals a significant access to justice gap. For a variety of reasons people do not always seek legal advice. Many fail to identify the issues they face as being legal in nature. They perhaps class it as a housing issue or a financial problem or put it down to bad luck. This means they then don’t seek for the right kind of help.

An executive summary of the report is available here.

The full technical report is available here.

The interactive individual legal needs dashboard is available here.

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Law Society of Ontario technology task force releases initial observation report

In November of 2019, the Law Society of Ontario’s technology task force released their initial observations and  recommendations over future regulatory approaches to tech and how it could appropriately facilitate access to justice.

The Technology Task Force has been established with the aim of reviewing the Law Society’s regulatory mandate, framework, and standards to determine whether they will adequately serve the public in the light of the changes tech is leading to in the legal sector.

The task force has recognised the need to act immediately to foster innovation and has recommended enhancing professional guidance in order to do this.

The full report is available here.

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Reasonable adjustments in the provision of legal services: a report for the Solicitors Regulation Authority

The Competition and Markets Authority reported in 2016 that one of the major barriers to accessing and understanding legal services was a general lack of accessibility, particularly in how information is presented and shared.  Charities such as Citizens Advice and Age UK have suggested that this is of particular concern regarding people who, due to mental or physical disabilities, might face heightened challenges.

The Solicitors Regulation Authority (SRA) commissioned YouGov to undertake research with disabled people in England and Wales. The aim of this research is to explore the reasonable adjustments that solicitors and law firms can make for legal services and information provision to be more accessible for disabled people.

Download the report

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Encouraging the Development of ‘Low Bono’ Law Practices

For decades, the discussion about access to justice has primarily focused on the ability of low–income individuals to obtain free representation by lawyers. Lawyer representation is the “gold star” of the legal profession and advocates of legal services for the poor have fought difficult battles to ensure the most disadvantaged in our country have access to these professionals. As a result, legal aid programs and pro bono services that assist the most economically disadvantaged in our country are now common in our legal service delivery system.

Despite those important efforts, only 50% of those eligible for free legal services actually receive them. Traditional access to justice platforms, while critical for offering legal assistance to a segment of the poor, have not been funded at levels that allow them to serve all those who need and qualify for their services. In lieu of lawyers, members of the legal profession have created self–help tools and substitutes for attorneys in the form of general advice hotlines, online document automation programs, and self–help law centers. If the profession correlates justice with lawyer representation, then the majority of average income Americans and a significant segment of the poor, are without it. In 2011 the United States ranked 50th out of 66 developed nations in providing accessibility to its civil justice system to its citizens.

In order to address the unmet legal needs of individuals in our country, the legal profession must advance an affordable legal services agenda that includes lawyers who provide competent legal services at reduced or “low bono” rates. Increased funding to help the poor and efforts to provide greater accessibility through the use of technology are efforts that can help bridge our justice gap. However, such efforts are limited in their scope. To make additional gains into providing more access to law, we need to devote attention to a segment of our society that currently receives no support and can potentially also benefit the near poor who go in and out of poverty. According to the research of an expert on U.S. poverty, “nearly 40 percent of Americans between the ages of 25 and 60 will experience at least one year below the official poverty line during that period and 54 percent will spend a year in poverty or near poverty (below 150 percent of the poverty line).” These figures reveal that a larger segment of the population requires a legal system that understands the fluidity of poverty and their financial instability. A lower–cost legal service delivery system must exist for those priced out of free services who need lawyers to get them back into a more stable financial reality.

Law practices that offer services at low bono rates offer a lawyer alternative to the more than 81.4 million households that earned less than the median income of $51,017 in 2012. Many of these individuals make less than $25 per hour but make too much to qualify for free legal services. Like the poor, Americans of average means need lawyers to advise them about legal issues that arise in their everyday lives but many of them cannot afford lawyers who charge hourly rates that exceed $300 per hour. This chapter explores the need to build the framework that encourages the development of low bono law practices.

Part I helps us understand low bono and why it is a necessary component of a broader legal service delivery system. Part II discusses the challenges that lawyers face in building and maintaining low bono practices. It addresses the financial challenges of running low bono practices and identifies the necessary components for developing viable low bono business plans. Part III outlines the framework the legal profession can and should build to support low bono law practices. It addresses the assumption that an affordable legal fee necessitates a lower quality service. It calls law schools, bar associations and courts to devote resources to build the necessary infrastructure for the delivery of legal services to average means Americans. The chapter concludes with a brief reflection of why lawyers may choose to build a career as a low bono lawyer.

Download full paper

Citation: Herrera, Luz E., Encouraging the Development of ‘Low Bono’ Law Practices (May 2014). University of Maryland Law Journal of Race, Religion, Gender & Class, Vol. 14, No. 1, pp. 1-49, 2014.

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The Legal Problems of Everyday Life: The Nature, Extent and Consequences of Justiciable Problems Experienced by Canadians

The purpose of this study is to inform policy makers about the incidence of civil justice problems and the extent of unmet need for assistance that justiciable problems in civil matters might represent. The study assumes a broad view of civil justice problems and unmet need. The broad view looks at the problem of civil justice and access to justice in terms of the prevalence of civil justice problems in the population. This involves identifying, by means of a sample survey, civil justice problems people have experienced that meet some reasonable threshold of seriousness. The broad view contrasts with the narrow view of civil justice and access to the justice system. The narrow view takes as a starting point the problems that come to the attention of the courts or other formal dispute resolution mechanisms.

Chapter II discusses the methodology and how it reflects the assumptions underlying the broad approach to civil justice needs that forms the paradigm of this research. Chapter III reports the basic data on the incidence of civil justice problems and considers the seriousness threshold that is fundamental to this type of research. Chapter IV examines the occurrence of multiple problems and the extent to which multiple problems reflect unmet need. Chapter V identifies the varied responses to civil justice problems and Chapter VI examines the outcomes of justiciable problems. The non-legal consequences of justiciable problems; in particular, the physical and mental health impacts are the subject of Chapter VII. Chapter VIII looks at the connection between the experience of civil justice problems and attitudes toward the law and the justice system.

Link to full report: Canadian Study

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Measuring Legal Service Value

This article proposes a theoretical foundation for measuring legal service value. It aims to support efforts to compare the value of offerings from different law firms, as well as alternative legal service providers.

The value of any legal service depends on (i) its effectiveness, (ii) its affordability, (iii) the experience it creates for its clients, and (iv) third party effects (the impact the service-provider has on people other than the client).

These four elements of value can be quantified through various metrics applied to firms or entities that provide a given service. Output metrics evaluate either the actual real-world impact of a legal service service, or the written and oral work products of the firm. Internal metrics check for processes or structures within a firm that demonstrably support high value outputs. Input metrics focus on the attributes and credentials of the individuals who provide the service.

This article concludes that measuring legal service value is challenging, and may be dangerous if done poorly. Nevertheless, the rewards justify the challenge. Higher quality legal professionalism, more effective and less burdensome regulation, and consumer empowerment are among the payoffs if we can find better ways to measure legal service value.

Download paper

Citation:  Semple, Noel, Measuring Legal Service Value (March 20, 2018). University of Windsor Faculty of Law, Canada

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The legal needs of small businesses 2013-2017

The Legal Services Board (LSB) has published its third research report focusing on the legal needs of small businesses and looking at how their views have changed – and the legal services market has responded – since similar research was conducted in 2013 and in 2015. It is the largest ever survey of small firms’ interactions with the legal sector drawing on over 10,000 responses.

This research tracks how an individual or business responds when faced with a problem that can be resolved using legal processes.

Commenting on the report, Dr Helen Phillips, Chair of the LSB, said:

While our research suggests the impact of legal problems on small businesses has decreased the estimated annual cost to the UK economy of their legal problems is still very substantial, at roughly £40bn. More worryingly 20% of businesses reported health impacts for staff from these legal problems, which could affect more than 1m individuals.

There still remains a perception of legal services as expensive – whether or not that perception is accurate – resulting in many businesses either ignoring legal issues or trying to handle them alone. It is hoped that work by regulators and others to implement the CMA recommendations on improving transparency should help address these issues over time.

There are so many opportunities for legal service providers to expand their business if they can tailor their services to what this group of consumers need, raise awareness of their services and overcome perceptions of high cost.

Key findings from the research include:

Business problems have declined in incidence

  • Around a third of small businesses had a legal problem in the preceding 12 months. This represents a fall from 36 percent in 2013 to 31%
  • The most frequent issues across the three waves of the survey are:
    • late or non-payment for goods or services provided
    • goods and services not as described, and
    • liability for tax owed.
  • Around half of small businesses reporting a legal issue said it had a negative impact
  • Total annual losses to small businesses due to legal problems is estimated at £40bn, and over 1 million individuals in small businesses suffered ill health.

Engagement with legal service providers remains limited

  • There has been a significant increase in the proportion of small businesses doing nothing when experiencing a problem (10%)
  • proportions adopting strategies including handling alone (50%) or using an advisor (24%) have changed little between 2013 and 2017
  • Less than one in 10 employed in-house lawyers or had a retainer. When advice was sought, accountants were consulted more often than lawyers
  • For those that did use a lawyer, 22% shopped around to find a provider. 50% of those who shopped around found it easy to compare different providers.

Views on cost effectiveness of lawyers have not improved

  • Just 11% of small businesses agreed that lawyers provide a cost effective means to resolve legal issues – this is down from 14% in 2015
  • Satisfaction that law and regulation provide a fair trading environment increased from 30% in 2013 to 44% in 2017.

See the full report

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