According to the ACC Chief Legal Officers 2016 Survey released last week, the oil and gas industry led in cuts to in-house positions, with 20 per cent of CLOs in that sector reporting significant cuts, compared to four per cent overall.
Those numbers are somewhat reflective of what is being seen in Alberta, says the ACC chapter president based in Calgary.
“We’ve seen a number of changes in the last 12 months and expect to see more — there’s been 10 per cent greater movement of people between organizations,” says Lorne O’Reilly, president of the Alberta chapter of the ACC and in-house lawyer with Dow Chemical in Calgary, noting he has seen some in-house peers also return to private practice during the downturn.
While some in-house lawyers in the sector suggest tough times can actually create more work for the in-house department due to restructuring or labour and employment-related work, others say that because legal is often seen as a cost centre it can be a target for reductions in staff along with every other business unit.
O’Reilly says it can depend on how the executive team views the role of in-house counsel.
“If you’re cutting jobs across the board, the perception is often that it’s not fair if you also don’t make cuts to the legal department,” says O’Reilly.
Canadian Corporate Counsel Association board member Lawna Hurl, who is senior counsel in a Calgary company, agrees legal departments in the province have taken a hit, but says those in the sector are mindful the region goes through cycles like the one it’s experiencing right now.
“It certainly isn’t a surprise to see an increased number of our Calgary in-house colleagues being laid off during this economic downturn. In-house legal departments have felt the impact of mass layoffs, particularly in the larger energy companies,” she says. “Most colleagues I’ve spoken to that find themselves currently without a position were well prepared for a period of time out of work and are optimistic as the general feeling is that the industry is cyclical, and while we are in a valley right now, there will be peaks again in the future.”
Tracey Beaudoin, general counsel of Packers Plus Energy Services Inc. in Calgary agrees it’s been a very difficult time for the industry and notes “not many are immune.”
“Fortunately, my team has remained the same as we have always been very lean and efficient and I do not staff for the typical cycles (staff up in the good times and lay off in the bad times). My team really steps up in the crazy busy times and we also use more alternative (temporary) solutions in the up-cycle so that we can remain efficient in the down cycle,” she says.
“Given the market we are definitely cutting the budget where we can, Beaudoin adds. “I have also driven my outside counsel more toward value propositions that rewards true value (alternative fee arrangements) rather than just discounts to hourly arrangements. It has been a really difficult thing to do and some counsel are getting it and some are just not willing to change so we definitely align with counsel who share our views.”
Elsewhere, it seems corporate law departments are spending more on internal budgets than on law firms or other external legal service providers, and the percentage of general counsel stating that their companies have designated legal operations staff has more than doubled, according to the ACC survey.
The study includes more than 30 benchmarks on the evolving role and priorities of the CLO/GC.
The survey of 1,302 GCs/CLOs in 41 countries, including 59 in-house lawyers from Canada, found that ethics and compliance remains the top concern of law department leaders, with regulatory issues/challenges one percentage point behind.
Data breaches were the third most concerning issue for general counsel this year, and the percentage of respondents who said their companies had experienced a breach dropped slightly, from 27 per cent to 22 per cent.
CLOs based in Europe, Middle East and Africa, and Latin America/the Caribbean had heightened regulatory concerns, as 44 and 41 per cent of GCs, respectively, answered that their companies had been targeted by a regulator in the past two years, compared to 31 per cent worldwide. Globally, CLOs in companies with large law departments were more likely to report being targeted, with 56 per cent of respondents in departments with 50 or more employees saying they have been targeted, versus 29 per cent of respondents in departments with fewer than 50 employees.
“An astounding one in three general counsel told us that their companies have been targeted by regulators in the past two years, reflecting the additional risk companies are exposed to as they increase their cross-border work and face a wider range of government scrutiny,” said Veta T. Richardson, ACC president and CEO.
Reversing traditional spending patterns, CLOs reported slightly larger internal budgets — 53 per cent of their budgets are devoted to internal spending versus 47 per cent for external spending. Complex litigation was the most common work to outsource, and 61 per cent of CLOs predicted that the total amount of work they send to outside providers will remain constant in the coming year.
Meanwhile, one in five GCs who expect a reduction in outsourcing indicate that they will increase the number of in-house lawyers in their department in the year ahead. Thirty-seven per cent of CLOs increased in-house staffing levels at their companies in the past 12 months, while the percentage who reported having legal operations staff more than doubled, to 48 per cent this year.
This explosive growth reflects ACC’s own experience with the special membership division formed for legal operations professionals, which has grown by about 52 per cent — to almost 400 members from 258 different companies — since last June when the division launched its inaugural ACC Legal Ops Conference. This year’s conference, to be held in Chicago June 23-24, will focus on meeting the growing demand for skill development and collaboration on law department strategic planning, use of technology, and innovation in managing internal and external resources.
CLOs in larger law departments were more likely to use alternative fee arrangements. Flat fees for an entire matter (41 per cent), flat fees for some stages of a matter (40 per cent), and retainers (32 per cent) were the AFAs law department leaders cited using most often. Across the board, use of AFAs continues to trend upward.