As workplace culture comes under increasing focus from the regulator, Iain Miller examines the relationship between culture and compliance


Those involved in risk management for law firms will know that systems and processes only take you so far. What is essential is to have a good culture: one that encourages compliance with the systems and processes, empowers individuals to speak up when something goes wrong, and that looks to learn from mistakes.

Regulating culture

Until now regulation of law firms by the Solicitors Regulation Authority (SRA) has been focused on systems and processes. Rule 2.1 of the Code of Conduct for Firms starts: “You have effective governance structures, arrangements, systems and controls in place to ensure that….” Regulating systems and processes in a law firm is relatively straightforward. If they do not exist or are inadequate, then that is a breach and if serious the SRA has a strong evidential base for taking action.

It has, self-evidently, become clear to the SRA that focusing solely on systems and processes is not enough. A firm may have an extensive array of such systems and processes but if they are ignored by individuals then they are worthless. Developments in the SRA’s thinking may have also been caused by a series of high-profile prosecutions of junior solicitors, many of whom, in mitigation, pointed to the culture of the firm in which they worked. None of these firms faced disciplinary action but the SRA has been heavily criticised for these prosecutions. In such cases is the pursuit of individuals treating the symptom and not the cause? Put another way, if culture is improved within firms will there then be fewer individual failings?

However, regulating culture is not as straightforward as regulating systems and processes as the dividing line between individual responsibility for a breach and the firm’s responsibility is blurred. The evidence is likely to be less clear-cut and the prospects of enforcement more remote. An additional complication is that the firm itself must be culpable. A bad culture among even a group of partners cannot of itself be the responsibility of the firm unless it somehow endorsed it at a senior level. So, while encouraging good culture is a positive thing, enforcing it is more problematic. Additionally, this is not a traditional area of activity for the SRA, and there are no specific rules in the code that deal with it.

SRA proposals

It is in this context that the resources published by the SRA on 8 February 2022 need to be considered by all those involved in risk and compliance in any law firm. The resources reflect a thematic review undertaken by the SRA. In relation to the SRA’s expectations the SRA states: “We expect firms to create and maintain the right culture and environment for the delivery of competent and ethical legal services to clients with effective systems, supervision arrangements, processes and controls in place.

“This includes taking steps to run businesses in a way that supports wellbeing by minimising the risk of working practices and workplace behaviours leading to poor mental health. A failure to put in place systems that protect employees may lead to an increased risk of breaching our regulatory requirements.

“Lawyers need good mental health to deliver what can be a challenging role in clients’ best interests. Being able to speak out about mental health difficulties and supporting employees at an early stage could prevent concerns and issues escalating. It can also support firms to minimise risks such as reputational damage.

“If employees are not adequately supported to manage mistakes or to manage client demands, they may be at risk of behaving unethically. If mistakes are made, you should be open and honest with clients, if they are affected, and explain promptly what happened and any consequences. We will always look at the context of misconduct and try to understand any wider mitigating or aggravating factors that may have contributed towards any issues.

“We also expect you to report any matters you reasonably believe could amount to a ‘serious breach’ of standards and requirements. Our Enforcement Strategy explains more about your obligations to report concerns to us and other legal regulators.

“Firms should encourage equality of opportunity, equal treatment, and respect for diversity so that employees are treated fairly at work. Prevent unfair or inappropriate treatment by doing everything you reasonably can to protect employees from bullying, harassment, discrimination, and victimisation.”

The strong message that the SRA is sending is that it considers good culture, and all that goes with it, as an important part of a well-run law firm that complies with its regulatory obligations. The mere fact that the SRA has said this is important reinforces the message that this needs to be high on each firm’s agenda. However, on its own, the resources published by the SRA could be regarded as being within the ‘nudge’ school of regulation – positive encouragement, but no hard edged enforcement.

Additions to the Codes

However, on 4 March, the SRA published a consultation on adding an additional rule to both Codes in the following terms:

Code for Individuals: “You treat colleagues fairly and with respect. You do not bully or harass them or discriminate unfairly against them. You challenge behaviour that does not meet this standard.”

Code for firms: “You treat those who work for and with you fairly and with respect, and do not bully or harass them or discriminate unfairly against them. You require your managers and employees to meet this standard, and you challenge behaviour that does not meet this standard.”

The SRA also makes clear the intended scope of these changes: “Our proposal is that the obligation should go beyond staff in a formal employment relationship, to include others with whom solicitors and firms regularly work closely, such as contractors, consultants, barristers and experts who may be instructed by the firm. This is reflected in the use of the term ‘colleagues’ in the draft standard. 



“We do not think the obligation needs to cover clients, or third parties such as lawyers acting on the other side in a case or litigants in person. These relationships are covered by other provisions in our Principles and Codes of Conduct. 

“Although the obligation is principally intended to cover behaviour at work (whether in an office or remotely), in our view it would also cover behaviour outside the workplace or direct delivery of legal services as well. This is where behaviour is in the context of a relationship between colleagues rather than a purely personal relationship.”

The link to culture is made clear by the SRA’s general counsel, Juliet Oliver, when publishing the document: ‘‘A poor workplace culture can not only affect wellbeing, with all the distress and concern that brings, but also ethical behaviour, competence and ultimately the standard of service received by clients.”

The consultation period lasts until 27th May 2022. It seems unlikely that any response will cause the SRA to fundamentally shift its approach. The rule change will require the approval of the Legal Services Board, so the changes will not come into force until the end of the year, at the earliest.

New obligations

This proposed rule change raises some important considerations. First, it marks a shift in the approach adopted by the SRA when it introduced the Standards and Regulations in 2019. That reworking of the existing regulatory framework was driven by an intention to remove rules and increase flexibility within the SRA’s regulatory community. Rules that were not strictly necessary were removed and the framework as a whole was slimmed down. 

The proposed rule change is however an additional express obligation placed on those whom the SRA regulates. The question is why? It’s clear that the SRA considers that confining itself to regulating the practice of law and the relationships between those whom it regulates, clients and the courts is not sufficient in the modern context. It considers that it also has to regulate the workplace and work-based relationships.

Until now the SRA has relied upon the SRA Principles which are wide ranging and cover similar territory at a higher level. These include an obligation to act: “in a way that encourages equality, diversity and inclusion” and to “act in a way that upholds public trust and confidence in the solicitors’ profession and in legal services provided by authorised persons.”

However, the dangers of this approach are evident from the Divisional Court’s decision in Beckwith v SRA [2020] EWHC 3231 (Admin) where the court was of the view that any breach of a principle had to be anchored in a provision of the code itself.  

The proposed change also aims to create greater certainty in relation to where the dividing line is between professional and private life. Finding that dividing line has become the most difficult issue in professional regulation as social media and changing social values has made it trickier to draw a clear line. The new rule brings how we relate to work colleagues (in the wide sense) both inside and outside work within the SRA’s remit.  

Some of the underlying issues about firm responsibility and the overlap between individual responsibility and firm responsibility remain. It is also far from clear when the SRA will take action and when will it leave the issues to the Employment Tribunal. There are real dangers in the SRA becoming drawn into employment disputes given the scope of the rule. However, the SRA’s position will be much strengthened by the rule change when it comes to dealing with bad culture.