Section 15 – regulating employers and employees

Section 15 of the Legal Services Act 2007 (the Act) requires an organisation – the employer – to be authorised by an approved regulator when it provides reserved legal activities to the public or a section of the public. Authorisation is not necessary when an employer is not seeking to do this, although it remains a requirement for any individual lawyer carrying on reserved legal activities as an employee.

Some of the approved regulators’ regulatory arrangements appear to impose restrictions that go further than those within the scope of Section 15 which could have negative consequences for both consumers and providers of legal services. They may prevent membership organisations, charities and local authorities providing legal advice to consumers at an affordable price and may restrict what ‘in-house’ employees can do.

One of LSB’s strategic priorities is to help the legal services sector flourish by seeking to deliver only regulation that address risks. This thematic review will consider whether the current arrangements for employers and employees established by the approved regulators go beyond the requirements of the Act.

If they do, we will look for evidence that any additional regulation is targeted, proportionate and compatible with the regulatory objectives. If satisfactory evidence is not forthcoming and we find examples of over-regulation, we will consider whether the Board should act which could lead to the issuing of guidance, the use of the enforcement powers in the Act, or relying on specific provisions in Section 15 to make recommendations to the Lord Chancellor.

This review will focus on the regulatory frameworks for employers and employees, including membership bodies, and will consider whether it is necessary to define what constitutes a ‘section of the public’. It will not consider current exemptions for trade unions in Section 15, issues relating to special bodies, transitional arrangements, or pro-bono work.

As part of our work in this area, we issued a discussion paper, in February 2015. The paper presented our initial analysis to establish how current practising rules for in-house lawyers align with the minimum restrictions that are contained in section 15 of the Act. We received a number of responses to the discussion paper, which we have published, alongside our response document summarising the views we received and our response to them. Informed by the responses we received, we drafted a statement of policy under section 49 of the Act setting out principles to inform the decisions we will make about changes to regulatory arrangements for in-house lawyers and invited representations. The final statement of policy was published on 8 February 2016.