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Best Practices for Associate Compensation

Welcome back to our in-depth exploration of compensation within law firms. In our previous post , we emphasized the significance of establishing a robust compensation system to attract and retain top talent and keep them motivated. In this post, we’ll discuss the crucial components needed to make an effective compensation plan for associates within the firm.

Compensating associates is a multifaceted task that law firms tackle annually to attract and maintain a talented workforce. Unfortunately, numerous small to mid-sized firms lack a robust structure that anticipates market trends and internal changes, and they also often need a simplified process for determining raises and bonuses.

Key Considerations for Developing Compensation Plans for Associates:

Associate compensation programs should incorporate the following elements:

  • Market Competitiveness: How does the firm’s associate compensation compare with market standards and rival firms?
  • Progression: Does the firm have a consistent and progressive structure for raises and bonuses that aligns with its associates’ experience and performance progress?
  • Incentive Alignment: Does the firm incentivize behaviors aligned with its vision and priorities?
  • Transparency: Does the firm clearly communicate with associates about their earning potential over time and at specific experience and performance levels?
  • Feedback: Are associates given enough performance feedback to understand the relationship between their salaries, raises, bonuses, and performance?

Capacity and Performance Expectations

Establishing a compensation structure begins with assessing attorneys’ current and future economic and qualitative potential. Firms should project the expected performance and contributions over the first eight to ten years of an attorney’s career in the firm.

  • Production Capacity – How much work will the attorney handle, and what is the value of that work? Production metrics may include billable hours or caseload, expected billings and collections, and, by extension, rates and realization.
  • Qualitative Performance – Which skills does the attorney need to succeed in the position/ to create value? Consider legal skills, case management, business development contributions, compliance/ interpersonal skills, recruiting support, etc.
  • Profitability – How much economic value should the attorney create beyond their cost? (Expected profit or profit margin)

The qualitative increases in value and objective contributions to revenue and profit indicated in the table below provide an example of the most common factors. Contributions should be considered in the context of increasing long-term value and offering short-term profits.

 

INCREASES IN VALUEInvestment_Icon

Profitability_icon-1CONTRIBUTIONS TO PROFIT
  Quality of professional work Personal Productivity
   Work ethic

(consistency of quality and quantity)

 Profitability of others

(supervision and training)
  Client relations and service Originations
  Personal development and accountability Recruiting profitable lawyers
   Business development contributions

(networking, publishing, speaking, etc.)

 Business hygiene

(timekeeping, billing, collections)
  Cultural support
  Firm building

(recruiting, training, process development, etc.)
  Adding to the reputation of the firm

The table below indicates an example of expectations by experience level.

PERFORMANCE EXPECTATIONS

KEY

  Consistent 

  Approaching consistent 

  Optional

 Not expected at the experience level 

 

ECONOMIC FACTORS

EXPERIENCE (YR)

Productivity

Realization

Training Supervision

 Profit Threshold

Billing Management

 Origination

1

2

3

4

5

6

7

8

9

10

 

A firm may combine all economic scores and consider the aggregate result as a qualitative factor. As long as the selected system is consistently applied, room exists for customization.

 

QUALITATIVE FACTORS – WEALTH CREATION

EXPERIENCE (YR)

Work Ethic

Work Quality

Bar, Professional Civic

Content Publishing Speaking 

Business Development Competence

Recruiting Contributions

Client Relations and Service

Pro Bono

1

2

3

4

5

6

7

8

9

10

 

Designing a rewarding compensation strategy is essential for maximizing the value from your law firm’s legal team. This involves careful deliberation over economic and qualitative criteria. Balancing these factors and customizing your approach enables your firm to attract and retain top lawyers while nurturing a consistent organizational culture.

  1. Start by clearly defining the skill set that brings long-term value to your firm and reward attorneys accordingly to ensure retention of the most compatible talent.
  2. Employ strategies to recognize and financially reward lawyers who consistently excel in high-value areas such as work ethic, quality, and client service, thus motivating them to sustain their high performance.
  3. For firms with top lawyers nearing retirement, devise a compensation plan that encourages emerging talents to take on leadership roles, guaranteeing a smooth transition and enduring success.
  4. Recognize and remunerate specialized expertise appropriately, for instance, by providing incentives to skilled litigators in a trial-focused litigation firm.
  5. Acknowledge and reward qualitative achievements, like the publication of influential content, encouraging lawyers to align with the firm’s broader objectives.

It is also necessary to acknowledge the value of specialized expertise and reward it accordingly. For example, if trial experience is highly valued in your litigation firm, compensating successful litigators who excel in this area is an excellent strategy. Finally, recognizing qualitative accomplishments, such as publishing high-quality content, can motivate your lawyers to contribute to the firm’s mission.

A compensation strategy that considers both qualitative and economic performance is vital for motivating and retaining the best-fit individuals for your law firm. By extending recognition beyond mere base salary increments to contributions that exceed expectations, you uphold the fairness and prosperity of your organization.

Join us as we continue to explore compensation best practices for law firms. Stay tuned for upcoming articles that will provide in-depth insights and actionable guidance on creating compensation systems that not only draw in and retain top legal talent but also bolster the firm’s long-lasting prosperity and cultural ethos.

©2024 PerformLaw
For more news on Compensation Strategies for Law Firms, visit the NLR Law Office Management section.

DOJ Plan to Offer Whistleblower Awards “A Good First Step”

The Department of Justice (DOJ) will launch a whistleblower rewards program later this year, Deputy Attorney General Lisa Monaco, announced today. Monaco stated that other U.S. whistleblower award programs, such as the SEC, CFTC, IRS and AML programs, “have proven indispensable” and that the DOJ plans to offer awards for tips not covered under these programs.

“This is a good first step, but the Justice Department has miles to go in creating a whistleblower program competitive with the programs managed by the U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC),” said Stephen M. Kohn.

“We hope that the DOJ will follow the lead of the SEC and CFTC and establish a central Whistleblower Office that can accept anonymous and confidential complaints. Such a program has been required under the anti-money laundering whistleblower law for over three years, but Justice has simply failed to follow the law,” added Kohn, who also serves as Chairman of the Board of the National Whistleblower Center.

According to Monaco, “under current law, the Attorney General is authorized to pay awards for information or assistance leading to civil or criminal forfeitures” but this authority has never been used “as part of a targeted program.” The DOJ is “launching a 90-day sprint to develop and implement a pilot program, with a formal start date later this year,” she stated.

While the specifics of the program have yet to be announced, Monaco did state that the DOJ will only offer awards to individuals who were not involved in the criminal activity itself.

“The Justice Department’s decision to exclude persons who may have had some involvement in the criminal activity is a step backwards and demonstrates a fundamental misunderstanding as to why the Dodd-Frank and False Claims Acts work so well,” continued Kohn. “When the False Claims Act was signed into law by President Abraham Lincoln in 1863 it was widely understood that the award laws worked best when they induced persons who were part of the conspiracy to turn in their former associates in crime. Justice needs to understand that by failing to follow the basic tenants of the most successful whistleblower laws ever enacted, their program is starting off on the wrong foot.”

Geoff Schweller also contributed to this article.

Copyright Kohn, Kohn & Colapinto, LLP 2024. All Rights Reserved.
For more news on the DOJ’s Whistleblower Award Program, visit the NLR Criminal Law / Business Crimes section.

Employment Tip of the Month – February 2024

Q: Can my company treat employees adversely because of their personal political beliefs? If they wear a shirt of their favorite candidate? Or proselytize about their candidate?

A: The short answer: There exists no “First Amendment Right to freedom of expression” in a private workplace, and that extends to political expression. See Manhattan Community Access Corp. v. Halleck, 139 S.Ct. 1921 (2019) (Only “State actors subject to First Amendment constraints.”)

So, yes, legally a private employer can refuse to hire Democrats or Republicans, and can fire an employee for wearing a shirt of their candidate or vocalizing a particular political position.

On the other hand, other laws can apply, such as the right to “concerted action” under the National Labor Relations Act. Overt adverse action also could be ripe for allegations of selective enforcement, such as “you only selectively enforce this rule against me because I am ___________”, where Title VII covers race, sex, religion, color and national origin; ADA covers disability; ADEA age, etc. Some political positions could easily bleed over into religious beliefs.

Even if legally permissible for a private employer to discriminate against holders of one particular political belief, from a practical management perspective, it cannot be recommended, and would be loaded with risk. Also, it could simply make for bad optics and make it harder to attract and retain the best talent.

Finally, this answer changes entirely for public employers and government employers, where employees do possess First Amendment rights, so long as, in general, they are speaking (1) as a private citizen, (2) about a matter of public concern, and (3) their speech does not interfere with the job. There are exceptions for high-ranking individuals, political appointees or someone trying to release classified information, though in many instances they would still be protected from retaliation.

© 2024 Wilson Elser
For more news on Political Expression in the Workplace, visit the NLR Labor & Employment section.

OSHA and NLRB Set Forth MOU to Strengthen Protections for the Health and Safety of Workers: A 2024 Outlook

On October 31, 2023, the National Labor Relations Board (NLRB) and Occupational Safety and Health Administration (OSHA) entered into a Memorandum of Understanding (MOU) to strengthen their interagency partnership. The purpose of this partnership is to establish a process for information sharing, referrals, training, and outreach between the agencies. Additionally, the agencies wish to address certain anti-retaliation and whistleblowing issues through this collaboration.

Since 1975, the NLRB and OSHA have engaged in cooperative efforts during investigations. According to NLRB General Counsel Jennifer Abruzzo and OSHA Assistant Secretary Doug Parker, the MOU seeks to strengthen this interoffice coordination in an effort to provide greater protection for workers to speak out on unsafe working conditions without fear of punishment or termination.

Exchange of Information

According to the MOU, the NLRB and OSHA “may share, either upon request or upon the respective agency’s own initiative, any information or data that supports each agency’s enforcement mandates, whether obtained during an investigation or through any other sources.” This information may include complaint referrals and information in complaint or investigative files. The MOU notes that this information will be shared only if it is relevant or necessary to the recipient agency’s enforcement responsibilities and ensures that the sharing of information is compatible with the purposes of the agency that is collecting the records.

For example, if OSHA learns during an investigation that there are potential victims of unfair labor practices who have not filed a complaint with the NLRB, OSHA will explain the employees’ rights and provide them with the NLRB’s phone number and web address. Additionally, if an employee files with OSHA an untimely complaint of retaliation, OSHA may then advise the employee to file a complaint with the NLRB, because the NLRB has a six-month time limit for filing such complaints whereas OSHA’s time limit is only 30 days. As a result, employers may be facing both agencies during an investigation.

Coordinated Investigations and Enforcement

The NLRB and OSHA will determine whether to conduct coordinated investigations and inspections in order to facilitate appropriate enforcement actions. If coordinated investigations occur and there are overlapping statutory violations, each agency may take relevant enforcement actions. In practice, employers should assume that if either agency is conducting an investigation into alleged retaliation, that agency will consider involving the other.

Takeaways for Employers

Heading into 2024, employers can expect to see more interagency coordination between the NLRB and OSHA during investigations. While the two agencies remain separate, there is a clear entanglement of enforcement action as the NLRB seeks to increase federal agency collaboration. As such, employers may presume that information collected by one agency will be provided to the other. As the agencies seek to increase worker protection across the board, employers will want to ensure that their management personnel are trained and up-to-date on the anti-retaliation and whistleblowing provisions of the Occupational Safety and Health Act and the National Labor Relations Act.

© 2023 Jones Walker LLP
For more news on the Partnership between OSHA and NLRB, visit the NLR Labor & Employment section.

An Early Christmas Present from Three Fifth Circuit Judges Who Concluded a Louisiana Property Is Not Subject to Federal Clean Water Act Jurisdiction

Garry Lewis owns 2000 acres in Livingston Parish, Louisiana and he has been fighting with the Army Corps of Engineers over whether any of those 2000 acres are wetlands subject to Federal Clean Water Act jurisdiction for over a decade. On two separate occasions the Army Corps of Engineers has said the answer to that question is “yes”. The first time the Corps made this determination, a District Court Judge disagreed. The second time was before the Supreme Court’s definition of “Waters of the United States”, including jurisdictional wetlands, in Sackett v. EPA and it is that second determination that is the subject of a Fifth Circuit Court of Appeals decision earlier this week.

The Sacketts had been fighting with EPA and the Corps about whether their much smaller property was subject to Clean Water Act jurisdiction for twice as long as Mr. Lewis until the Supreme Court found in the Sacketts’ favor earlier this year. The day the Supreme Court decided Sackett I wrote that “[f]or my entire adult life, the Courts have deferred to EPA’s interpretation of statutes it has been charged by Congress to implement. That era is most certainly over . . .”

This week three Judges of the Fifth Circuit proved my point. Over the Corps’ objection, the Judges took it upon themselves to apply the Supreme Court’s Sackett holding to determine that “based on photographs of [Mr. Lewis’s] property” there is “no ‘continuous surface connection’ between any plausible wetlands on the Lewis tracts and a ‘relatively permanent body of water connected to traditional interstate navigable waters.’”

The Corps had argued unsuccessfully that it should be given the opportunity to apply Sackett for itself before Judges weighed in.

The Fifth Circuit Judges were probably right to conclude that, given the chance, the Corps “could create an ‘endless loop’ of financially onerous regulatory activity” for Mr. Lewis. But the Judges fail to mention that conclusion could be based on the fact that EPA’s and the Corps’ tenth, post Sackett, attempt to determine the reach of the Clean Water Act continues to extend Clean Water Act jurisdiction to “tributaries,” “impoundments,” and “wetlands” that have a “continuous surface connection” to waters that are not “traditional navigable waters, the territorial seas, [or] interstate waters.” That’s a different standard than the Justice Alito-supplied standard the three Fifth Circuit Judges applied in holding that the Lewis property was not subject to Clean Water Act jurisdiction even though a culvert on the Lewis property connects to a “relatively permanent water” which connects to another “relatively permanent water” which connects to a “traditional navigable water.”

Now EPA’s and the Corps’ most recent Waters of the United States regulation is currently being challenged in two Federal District Courts, including on the basis that the regulation is broader than allowed by the Supreme Court in Sackett. But that regulation hasn’t been struck down yet. That apparently didn’t matter at all to these three Judges of the Fifth Circuit. And it may be worth mentioning that one of those challenges to EPA’s and the Corps’ regulation is in Federal District Court in Texas which is in, you guessed it, the Fifth Circuit.

What does this all mean? Well, I think it means we’re going to continue to see some Judges applying the Supreme Court’s Sackett holding to determine the extent of Clean Water Act jurisdiction, ignoring EPA’s and the Corps’ subsequent regulation, unless and until Congress decides to get involved in the longest running controversy in environmental law.

©1994-2023 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
For more news on Clean Water Act jurisdiction, visit the NLR Environmental, Energy & Resources section.

AI Versus Westlaw Copyright Bellwether Hurtles Toward Jury as Summary Judgment Largely Denied

In one of the first lawsuits to allege that generative AI companies violate the U.S. Copyright Act by using copyrighted works to train machine learning models, Judge Stephanos Bibas of the Delaware Circuit Court recently denied the majority of issues raised in cross motions for summary judgment filed by plaintiff Thomson Reuters and defendant Ross Intelligence Inc.  The court declined to issue a dispositive ruling on the hot-button question of whether the fair use doctrine protects generative AI companies that use copyrighted materials to train their programs.

Thomson Reuters (owner of Westlaw) sued Ross Intelligence, a legal-research generative AI startup, in May 2020, alleging that Ross was liable for both copyright infringement and tortious interference with contract.  The allegations against Ross stem from its endeavor to create a search engine that uses machine learning and artificial intelligence to provide answers to commonly asked legal questions.

In need of material to train its generative AI, Ross attempted to obtain a license to use Westlaw.  When Westlaw turned Ross away, it asked third-party legal research companies to provide it with legal material — much of which those legal research companies obtained from Westlaw.  Thomson Reuters contends that Ross copied large portions of Westlaw’s Headnotes and Key Number System.

After Ross’s motion to dismiss the copyright claim was denied in March of 2021, the parties each moved for summary judgment on a multitude of issues.  Most notably, Thomson Reuters moved for summary judgment on its copyright infringement claim, and both sides moved for summary judgment on Ross’s assertion of fair use.

On the issue of copyright infringement, Judge Bibas granted Thomson Reuters’ motion on the limited issue that Ross “copied at least portions of” Westlaw’s work.  However, the remaining issues of the copyright claim — the validity of Thomson Reuters’ copyright and the substantial similarity of Ross’s work — were denied summary judgment and will go to a jury.

On the issue of fair use, Ross contends that its use of Thomson Reuters’ materials, even if found to be copyright protected, was permissible.

The question of fair use protection for generative AI developers is significant because all generative AI requires the input of a vast amount of information to train its machine learning and develop its content.  Intellectual property law comes into play where the training materials — the “input” into the AI — are copyright protected.  When the input material is copyright protected, AI developers may seek to rely on the fair use doctrine to use copyright-protected works without permission from the copyright holder.

As discussed in the court’s opinion, whether the use of copyrighted material is fair depends on the balance of four factors — the purpose and character of the use, the nature of the copyrighted work, the amount and substantiality of the portion used in relation to the copyrighted work as a whole, and the effect of the use upon the potential market for the copyrighted work.  Courts tend to give the most weight to the first and fourth factors.

The first factor, the purpose and character of the use, looks to the commerciality and transformativeness of the use of the copyrighted work.  While Judge Bibas held that Ross’s use of Thomson Reuters’ materials was undoubtedly commercial in nature, which weighs against finding fair use, the court could not say as a matter of law whether Ross’ works were sufficiently transformative.  Each party offers a differing account of exactly how Ross used the Westlaw information — did Ross merely translate Westlaw’s headnotes into numerical data that would later be displayed by its AI search engine?  Or did it, as Ross contends, study Westlaw’s headnotes and opinion quotes only to analyze language patterns rather than replicate Westlaw’s protected expressions?

According to the court, the answers to these questions fall within the discretion of a jury. In this regard, the court noted that Ross’s use was “transformative intermediate copying if Ross’s AI only studied the language patterns in the headnotes to learn how to produce judicial opinion quotes.  But if Thomson Reuters is right that Ross used the untransformed text of its headnotes to get its AI to replicate and reproduce the creative drafting done by Westlaw’s attorney editors,” then Ross’s argument that its work was sufficiently transformative might fail.

As to the other three factors for fair use, the court similarly held that they could not be resolved on summary judgment because of remaining questions of fact.  However, the court noted that the second factor — the nature of Thomson Reuters’ copyrighted work — seemed to favor fair use.  Specifically, Westlaw’s Key Number system is a method of organization that “inherently involves significantly less creative or original expression” than traditionally protected materials, and the Headnotes are “akin to news reporting” that must be carefully separated from the unprotected underlying facts of the judicial opinions they synthesize. A jury trial in this case might yield the first judgment on issues related to generative AI, copyright, and fair use.  This case could have an impact not only on the AI and machine learning industry, but also the public interest as a whole while the world continues to adjust to the myriad new realities and resulting issues of first impression on the new AI frontier.

© 2023 Vedder Price
Article by Keeley Sawyer of Vedder Price
For more articles on AI copyright, visit the NLR Intellectual Property law section.

Legal News Reach S3E1: The DEI Dialogue: How Feedback Fosters Inclusion and Diversity in the Workplace

Welcome to Legal News Reach Season 3! We begin the new year with a conversation between the National Law Review’s Social Media Manager, Crissonna Tennison, and Bracewell’s D&I and Community Outreach Director, Monica Parker.

By now, most firms understand that diversity and inclusion are nonnegotiable foundations for a successful organization, but feedback conversations remain a commonly overlooked—or avoided—tool for fostering deeper professional connections amongst colleagues with different backgrounds and experiences. What role does feedback play in successful D&I practice, and how can attorneys approach it?

We’ve included a transcript of the conversation below, transcribed by artificial intelligence. The transcript has been lightly edited for clarity and readability.

 

Crissonna Tennison

Thank you for tuning in to the Legal News Reach podcast. My name is Crissonna Tennison, Web Publication Specialist and Social Media Manager for the National Law Review. In this episode, I’ll be speaking with Monica Parker, Director of D&I and Community Outreach at Bracewell LLP.

Monica, can you tell me a little bit about your background, what led you to practice law in the first place and eventually to Bracewell?

Monica Parker

Well first of all, thank you for having me. I’m excited to be here to have this chat with you today Crissonna.

As you mentioned, I’m a former practicing attorney. I have spent about two decades in law firms and professional development and, recently, diversity and inclusion. And what made me practice law, I’m not the typical law student. I didn’t go straight from college to law school, I worked for four years. And you know what, I missed school. So I appreciated the intellectual rigor, I would say, of law school, and then I ended up falling in love with Harvard Law’s negotiation program. That’s where I went to school. So I ended up becoming a teaching assistant for the negotiation program while I was there, and then came back as a lecturer in law to teach the course after I graduated.

What led me to Bracewell–I would say here is the plug for the importance of your network. I heard about this position through someone that I knew when I was a summer associate many years ago at a law firm. This person was then working in professional development for that firm. She’s now the Chief Talent Officer at Bracewell. So that’s how I heard about the opportunity. I will say that when I interviewed I had conversations with the firm’s Managing Partner, as well as the chair of the D&I Committee, the firm’s General Counsel, the hiring partners, and others, and really just appreciated the genuine, authentic nature of the leadership. They were candid with me about what’s working, what the challenges are, and it was an opportunity to have an impact and work with some good folks to that timeline at Bracewell.

Crissonna Tennison

It’s always great when your workplace is transparent with what’s going on and shows that they’re willing to have ongoing conversations. What brought you more specifically into the diversity and inclusion world and practice?

Monica Parker

I would say, like many folks who work in this arena, I was motivated by my own experiences of being a woman of color in this profession. At this stage of the game, I have a wealth of experience. And I’ve been fortunate in my career, and I saw this as an opportunity to help lift others up. Plus, I really wanted to have the opportunity to have an impact. And there’s lots of space to have impact in the world of diversity and inclusion these days.

Crissonna Tennison

Definitely. Broadly speaking, what would you say some of the hurdles are to ensuring diversity specifically in the legal business and legal field?

Monica Parker

There are three major challenges among others, right? There are several, but I would say pipeline is one, recruiting is another, and then retention is a third.

So when I think about the pipeline piece, not everyone has the same opportunities, right? They can’t all necessarily go to the best schools, they may not have family members or family friends who sit around the dinner table talking about the practice of law, they may not have opportunities with college applications or law school applications. So that’s one hurdle, right? And if you do make it over that hurdle, and you graduate from law school, then not everyone is going to come to a large law firm. So this is actually a very competitive market that we’re operating in to begin with. And then once you get there, for underrepresented groups, you have to make sure that they’re getting the same kinds of opportunities as everyone else. So for example, you need there to be a lot of candid feedback conversations, people need mentors and sponsors. But often people tend to connect with those who are like them. So those are some of the challenges specifically for the legal industry, it can be kind of difficult to feel comfortable enough with people to have the kind of conversations you’re talking about. So if you have people that look like you that makes all the difference in the world.

Crissonna Tennison

So when it comes to diversity and inclusion, what are some general patterns that you’ve noticed that have been productive, and some patterns that are not quite so productive at this time that you’re hoping might change?

Monica Parker

So let me talk about the not so productive patterns, right? So in the world of D&I, you sometimes can see what I call “check-the-box” exercises. So, for example, if everyone jumps onto the training bandwagon, training in and of itself doesn’t have the greatest return on investment. Here’s what you can do to be more productive: you can pair that with coaching, you can choose a particular area. So let’s say you want to do unconscious bias training when it comes to hiring practices, then you can do the training with folks who are involved. And you can provide coaching for those folks as they’re going through the hiring process. And then you can notice what’s working, what’s not working, continue to develop it and iterate it. And I think that’s how you shift from a not so productive practice or pattern to something that is more productive.

I think just telling people that you need them to do something, but then not giving them any tools to do it, is probably not the best approach. So for example, I mentioned feedback. We know it’s good. We know it’s important, but if people aren’t doing it, especially if you notice they’re not providing feedback to folks of color, you want to dig into that and you want to understand why and then offer some specific support around that.

Crissonna Tennison

I can see how that’s definitely something that comes up a lot. Leaning more into the feedback piece, that’s something that you speak a lot about. When it comes to feedback, these conversations obviously are not fun for most parties involved. Can you talk more about how you can navigate those conversations in a positive way, and what some of the benefits are of doing so?

Monica Parker

Sure. As you said, having feedback conversations can be difficult. And I can say this because I’m a lawyer, lawyers are often conflict averse. And so what happens is, you need to give this feedback, you know you do, you don’t want to give feedback because you’re worried about how the other person’s going to respond to it. So then you don’t do it, the behavior continues or gets worse. And you need to have this conversation. It ends up being this vicious cycle. Also, as we’ve talked about, if people tend to work with those that they like, or who look like them, then they tend to be more comfortable giving feedback to those folks as well. And let me just point out also, everyone’s very busy. And it can feel like giving feedback is one of those things that can take so much time. And “you know what, maybe it’s just better if I do it myself.”

Well, the challenge there is that if you’re not giving that feedback, then you’re not giving the person the opportunity to grow and to develop. And that’s the benefit of giving feedback. And then also as a way of showing your commitment to your employees too, if you’ve spent the time and the money to invest in them joining your firm, then you want to make sure you’re giving them the feedback that they need in order to be able to succeed there.

And I think that sometimes we think it’s going to take a lot of time to give that feedback. But it actually can take less time than you think. If you think about what you want to share, provide specific examples. Give the person the opportunity to ask questions, and then see how they do.

Crissonna Tennison

Unfortunately, I relate to the putting off things part. And what’s interesting about that is when you notice something that requires feedback early on, that conversation, it would seem, would tend to go a bit better than if you let it go on for a while and now you’ve built up resentment and the problem’s bigger. I can see how maybe creating a framework for doing it in a positive way might decrease the dread that might make you put it off. I can see how that can be really important.

Can you talk about some actionable tips that managers can take to provide feedback, maybe more routinely and in a more comfortable way?

Monica Parker

The first thing to do is to think about how you want to frame the conversation, especially if it’s making you nervous that you have to give this feedback and you’re worried about how the other person’s going to respond. So even a simple line, something you can remember and say easily, “I care about you and want you to do well here,” and then provide the feedback, it demonstrates to the other person, “This is about helping you grow and develop, and that’s important to me.” And I think that’s often what people want to hear when they’re on the receiving end of that feedback.

The second thing you want to do is share specific examples rather than talking in general terms. I can remember when I was a junior associate at a law firm and I received back work covered in red lines, you know, it looked like it was written in blood, just a marked up memo of my work. And the partner had put a handwritten note at the top of the memo that said, “Do better.” Who? What? What does “do better” mean? Some specificity would help. Now in my case, what I did is I went and talked with a more senior associate, to get a sense of what needed to be done to improve the memo. But being specific with your feedback is very helpful.

And then…it’s time to let the feedback sandwich go. Okay! The feedback sandwich is where you say something good, then you give them some other critical feedback, and then you say something good. The reason why it’s time to let it go is because everybody knows it’s coming. People are very savvy now. So they can tell when there’s a feedback sandwich in the works. And they can never actually hear the good stuff you’re saying because they’re waiting for that other shoe to drop where you tell them what’s not working. So why not just offer the critical feedback upfront? That’s one option. Another option is to ask the recipient, “What do you want to hear? Do you want to hear the feedback about what I want us to improve on first and then tell you what’s going well? Or the opposite?” You can ask!

Crissonna Tennison

Right as you said “it’s time to let go the feedback sandwich go” I was going to ask whether we should do the feedback sandwich, because I feel like if I received that paper that said “do better” with just a bunch of red marks I would shut down, at least at first. So yeah, there’s definitely room for being kind in the way that you do it.

Out of curiosity, when it comes to offering feedback, is it helpful if you’ve already developed some kind of a positive relationship with the person you’re giving feedback to? Can you speak to that a little bit?

Monica Parker

I think that’s a really good question. I think that to the extent there’s rapport and trust has been developed in relationship, it does make it easier to give that feedback because the recipient already knows that you care about them and knows that you want them to do well, and also hopefully feels comfortable asking more questions or sharing their perspective about whatever the situation is. With that being said, that can’t always be the case, right? If you’re just starting at an organization, if you’re a new person, building that rapport is going to take some time. Interestingly enough, I think if you were to give candid feedback, if you were to provide examples, if you were to do that in a timely fashion that would actually help you to build that trust and rapport, that will suit you further in the relationship as you go forward.

Crissonna Tennison

If you’re an employee, what should you be looking out for in terms of indicating that you’re not getting the level of feedback that you should be getting or that you deserve to get?

Monica Parker

If all you’re hearing is you’re doing fine, you want to dig deeper. It could be true that you’re doing fine. But it also may not be true that you’re doing fine. It could be that you’re working with someone who has difficulty sharing critical feedback or who’s very busy. And in that case, you’re going to want to dig a bit. Also, if you find yourself in your annual review, and you’re surprised by some critical feedback that you get, that’s an example that you haven’t been getting the feedback that you need, because what you hear in your annual review should never be a surprise, in terms of offering feedback. And it’s something that you want to offer regularly.

Crissonna Tennison

Would it be helpful for people to establish more frequent check-ins instead of the once a year, big one?

Monica Parker

It’s definitely helpful to establish regular check-ins. In some of my previous roles, I’ve had the opportunity to have a weekly or every other week check-in with the folks that I was supervising. And those are fantastic opportunities, not only for me to give feedback, but also for me to receive feedback. And again, that’s another way to build that relationship of trust and rapport. But if you’re doing this on a regular basis, even if it’s just a quick check, and a quick coaching session, you can catch a lot of things early and repair those things early as opposed to waiting until the annual review. By the time you get to the annual review, it’s actually too late. At that point, it really should just be a review of the year and then looking forward. So it’s very important to establish those regular check-ins again, even if they’re very short, for sure.

Crissonna Tennison

So I’m an employee, and I’m finding that I’m not getting the feedback that I think I deserve. What are some tips you have for an associate to proactively ask for that feedback if their supervisor hasn’t reached out recently, or may be dropping the ball in that area?

Monica Parker

I think a common mistake that people make is they just say “I’d appreciate any feedback.” And you may not get it when you ask that question. I think you want to be more specific than that. You could say something like, “Well, how would you have handled this?” Or “What would your approach with the client have been?” in case of an associate talking to the partner, or “I noticed you changed this point here? Will you tell me more about that?” Because when you’re asking very specific questions, you’re much more likely to engage the person in the conversation. And I think also sometimes being on the receiving end of critical feedback is hard for a lot of us, myself included. And so then you want to be prepared to take in what you hear. I often suggest that people take notes, because sometimes it can be hard to hear and taking notes can help you digest a bit better. And then also go find someone to process it with, someone who can help you understand the feedback that you received, you know, help you stay on an even keel. So those are some of the things that I would recommend.

Crissonna Tennison

That is really helpful advice. I can see how asking, “Oh, how would you have done that?” or “What was your thought process behind that?” makes it less about you, which makes it easier for everyone involved.

What can leaders do to ensure that people of color and other minoritized people feel comfortable being open about their experiences and evolving needs? I think you already spoke to this a little bit when it comes to building rapport, but is there anything else that you think would help?

Monica Parker

For sure, I think providing opportunities for underrepresented groups to share their perspective is really important. But then you have to take it a step beyond that. You have to be sure to look for ways to act upon what it is that you hear. And then there’s a step beyond that, where you then have to communicate that you’ve done so. So as an example, when I joined Bracewell, I did a listening tour. So I talked with over 100 attorneys about their experiences with diversity and inclusion at the firm. And then I had the opportunity to go to the partner retreat to present my findings as well as to make recommendations. And then from there, the D&I committee has spent its energy and time implementing those recommendations. So it’s really important, if you’re going to if you’re going to ask people to share about their experiences, you want to make sure that you’re demonstrating that you heard it, you’re trying to make an effort to do something with that feedback, and you’re making sure that they know that that’s what you’ve done.

Crissonna Tennison

Yeah, I can see that being helpful because it is a bit of emotional labor, sharing your feedback as a person of color or someone with a different experience, especially in a professional context. That can be a bit challenging, and it’s helpful to know that the other parties involved are also doing their part.

You talked a little bit about it, but what does a day in the life of a D&I consultant or leader look like? I’ve always been curious about that.

Monica Parker

I can tell you first, it’s always a mix, always. So for example, I could be talking with firm leadership about a strategic diversity initiative, I could be immersed in programming, I mentioned the feedback workshops. That’s something that I’ve designed and then delivered to the partners of the firm. There can be times where I’m meeting one-on-one with a partner or an associate to talk about an issue. Also Bracewell likes to collaborate with clients on diversity initiatives. So for example, we partnered with a client through our mutual summer programs where our summer associates of color got to meet with the clients of color, and then the General Counsel and members of the legal team for that client had lunch with all those folks and they got to talk about diversity and inclusion in that legal industry. So it’s always a fun mix of activities, it means that there’s never a dull day.

Crissonna Tennison

No, I can imagine there would not be a dull day in that area. So shifting a little bit, you mentioned that you used to work as an Associate Executive Director for a Seattle-based education nonprofit. Would you be interested in talking a little bit more about that and how it informs your current practice?

Monica Parker

Sure. At the education nonprofit we worked with students of color who are often the first in their families to go to college. So I got to see pipeline issues firsthand. Our students were rising fifth graders, and we worked with them all the way through college. And what I learned more than anything else is the importance of starting early, and then also looking for opportunities to continue to support the pipeline. But I think one of the major lessons was thinking about what it’s like to be the first. So not everyone has a parent or a family friend, or connections, right? Folks who went to law school or practice at large law firms or work for large corporations. Not everyone has that. They have a very different experience coming into a law firm, and that can be all new for an associate. And so it’s both recognizing the challenges for folks as you think about the pipeline issues, then it’s also about thinking about the challenges once that person enters a law firm. So that very much informs the work that I currently do.

Crissonna Tennison

It’s so easy to fall through the cracks. Do you have any D&I initiatives at Bracewell that you’re particularly proud of, or that have been particularly effective?

Monica Parker

I mentioned one of them, so let me dive a little bit deeper into it. I have a background in training folks on how to navigate difficult conversations, this came out of my work at Harvard Law School. And so I developed an interactive workshop on how to give feedback for the partners of the firm. And so what I’m doing in the workshops is I’m sharing a framework for how to have these conversations that allows you to prepare for them and hopefully navigate them with a little less anxiety and with more ease. And then we also talk about differences in feedback, that concept of how it can be easier to give feedback to someone who is like you or looks like you. And when there’s differences in feedback that can create some challenges.

So let’s say, for example, that a white male partner is wanting to give feedback to a woman of color associate. He might be worried that what he says can be perceived as sexist or racist, in which case he’s not going to share that feedback, he’s gonna say you’re doing just fine. So we talked about how differences in feedback can impact the relationship and the associate’s ability to grow and develop at the firm. And I think of the workshops too as a luxury for partners to have a dedicated span of time where they can just talk about delivering feedback and what’s challenging about it, and how to improve upon it. And also to hear about the experiences of their colleagues and know that they’re not the only ones navigating this and that it can be very difficult.

One of the things that’s funny to me about doing workshops, I’ve done training for lawyers, and of course, being a lawyer, I know what lawyers are like, and I know what we think about training. So one of my favorite comments was after a workshop when a partner came up to me and said, “I was skeptical. But this was good.” It’s a tough crowd! It’s a tough crowd.

I would also say that one of the things I’ve loved is that after the workshops, partners will request individual coaching. I remember one partner coming up to me right after the workshop and saying, “I’ve got a feedback conversation coming up with an associate and I’m worried about how the associate’s going to respond.” So we did some coaching on how to frame the conversation with specific examples on what to do with your own strong emotions that you might be experiencing as you’re giving the feedback. So the partner had that conversation with an associate and came back and told me that it went well and that the training was time well spent. That is high praise.

Crissonna Tennison

Honestly, I feel like if you can master the feedback conversation, especially in this kind of a high stakes environment, that has to be transferable to life. I feel like your communication skills would be through the roof. I would love to attend a workshop.

Monica Parker

You’re right. What I tell participants is, it will absolutely help you at work in terms of feedback with associates, it will help you in your work with clients, in your relationships with your colleagues; in general, it can help you at home as well with your significant other. The only folks that this material does not work on would be toddlers. They are quite skilled at difficult conversations and negotiation. I have lost every single negotiation that I’ve had with my nephew starting when he was a toddler and now his toddler sister. So forget it. It won’t work on toddlers but everyone else yeah, okay,

Crissonna Tennison

Well, we’ll just have the toddlers tell us how to communicate. They’re very clear with their needs.

So you wrote a book that was published by the American Bar Association, it’s called “What It Takes: How Women of Color Can Thrive Within the Practice of Law.” Can you talk a little bit more about what motivated you specifically to write that book and what you think readers might get from it?

Monica Parker

At the time, there was a study that the ABA had published called “Visible Invisibility,” and it was about how women of color tend to slip through the cracks at large law firms. There have been studies done on women, done on people of color, but women of color just weren’t in the mix. And so this particular report focused on women of color at large law firms, and I will say what I read was sobering, but absolutely necessary. And what I started thinking was, this was needed. I wonder if it’s possible to do a follow-up where we talk with women of color partners at large law firms who are doing well and see what we can learn from them. So I had a chance to conduct interviews with women of color partners across the country, which was wonderful. So we got a wide range of perspectives on what was working for them, what was challenging, and then lots of tips and tricks on how to be successful at large law firms. So it’s a fantastic read for associates, of course, but it’s also a great read for law firms as well.

Crissonna Tennison

Do you think it would be helpful to read even if you’re not a woman of color?

Monica Parker

Absolutely, it is. It’s useful for anyone to get perspective on what it’s like to be a woman of color. And interestingly enough, and probably not a surprise, but a lot of the advice offered there is valuable for anyone in any role, essentially. So yes, it’s a great read. If I do say so myself.

Crissonna Tennison

Oh, no, I love it. I believe you. And it’s good to advocate for yourself. So I will probably read it.

Can you talk a little bit more about what you feel the stakes are when it comes to developing diversity and inclusion practices in law? Like what do you feel like the larger stakes are?

Monica Parker

Well this one may be obvious, but it bears repeating: clients are wanting to see diversity in their legal teams. It’s going to vary from client to client. But we have seen this trend where it’s becoming increasingly important, and there are clients who absolutely demand diversity in their legal teams. And that’s something that’s not going to go away. So that’s a major stake. I would say also, firms, again no surprise, have invested a lot in their people. And so if you invested that much in your people, you want to retain your people, and you want them to succeed, and you want them to be fulfilled. Turnover is expensive.

I’d also say that you want to have a reputation for attracting diverse talent. And candidates for firms are asking about that. That’s something that I’ve noticed that’s also becoming increasingly the case, and not just candidates of color, but white candidates as well, because they want to work at a place that values diversity, equity, inclusion, and belonging. So if you want to attract the best talent, you want DEI to be top of mind.

Crissonna Tennison

I feel like I’ve been hearing that lately, that diversity issues are, in addition to all the other reasons why they’re so important, they’re also important when it comes to just the business elements of running a firm. Do you see any possible trickle down effects of diversity and inclusion in law affecting people in the broader world, like clients or just people who need legal services? Is that something that you think is relevant?

Monica Parker

It’s relevant, because as humans, we all want to see people who look like us. So if I’m a client of a law firm, I would like to see people who look like me working at that law firm, doing well at that law firm, whether it’s a client at a large law firm, you know, a medium sized firm, a small firm. That’s important too just because lawyers often are very involved in their communities as well. It’s important to see the representation match up with the community. So I do think it’s important for that to be there.

There are some of the standard arguments you may have already heard around how diverse teams perform better, have better results overall. So I think that just by nature of having that diversity, you bring a diversity of experiences to the table, and that’s at the end of the day going to be all to the good.

Crissonna Tennison

Do you have any final thoughts or messages to share for listeners or anything that you feel we should have asked or touched on that we didn’t?

Monica Parker

One final point: diversity, equity and inclusion is a team effort. So it’s not up to your DEI person or leadership to make things happen, although those are necessary, folks. I look at it as, D&I requires every person in the organization to be focused on making the workplace an inclusive space where everyone can achieve.

Crissonna Tennison

Yeah, I can see how in an office environment you have to work together to create an effective workplace. And that includes working together to build a more accessible, inclusive workplace where everyone feels comfortable to do their best work.

Thank you so much for coming on through and talking to us today. That was a lot of really interesting and good information. So yeah, thank you for coming and joining our show today and sharing your insights with us.

Monica Parker

Well, thanks again for having me. I enjoyed our conversation.

OUTRO 

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Mediation vs. Arbitration Provisions in a Contract

All provisions of a contract are relevant, no matter how innocuous they appear to be and no matter how many times you are told that they are “just boilerplate.” Mediation and arbitration provisions often are deemed to fall in the “boilerplate” category, but the impact of these provisions cannot be understated.

Taking a step back, in the event of a dispute between contract counterparties, the underlying contract often provides an avenue for resolution of such dispute, which may require that the parties pursue such matter in court, through arbitration or by other means, including mediation. While most parties are familiar with the concept of litigation, the differences between mediation and arbitration are less well-known. Among the many relevant factors distinguishing between mediation and arbitration, the following three factors should be considered:

  1. Mediation in the United States is non-binding, meaning that a party is not obligated to follow the determination of a mediator. Arbitration, on the other hand, may be binding.

  2. From a timing standpoint, the mediation process is more expeditious, often being completed anywhere from one to three months after the process is initiated, depending upon the complexity of the issues and the parties’ agreements. Arbitration proceedings often last as long as a lawsuit with a formal discovery process and other formalities that commonly would be part of a lawsuit.

  3. From a cost perspective, mediation is more economical, largely due to the speed of the process and less legal formalities. This generally bodes well for the parties if they agree to abide by the determination of the mediator or view such decision as indicative of how an arbitrator or judge ultimately would rule on a matter. But since mediation is non-binding, parties may view this process as an unnecessary delay and waste of resources.

© 2023 Chuhak & Tecson P.C.

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Foreign Account Keeps Three-Year Statute of Limitations Open

In Fairbank v. Commissioner, T.C. Memo 2023-19 (Feb. 23, 2023), the Tax Court ruled that the three-year statute of limitations did not bar assessment. On April 12, 2018, the IRS issued to Leigh and Barbara Fairbank a notice of deficiency for tax years 2003-2009. Because the Fairbanks timely filed their tax returns, they asserted that the three-year statute of limitations barred assessment. The case was determined based on an analysis of IRC Section 6501(c)(8). Section 6501(c)(8) provides that the statute of limitations shall not expire until three years after the date on which information is reported to the IRS for a foreign trust.

Barbara Fairbank was previously married to Mr. Hagaman, who was in the business of oil trading. He held financial accounts in Liechtenstein, New Zealand and Switzerland. Mr. Hagaman failed to file tax returns for years 1980-1982 and the IRS asserted he had a tax liability of $14.7 million. The IRS awarded Barbara innocent spouse relief.

In 1981, Barbara and Mr. Hagaman separated and a Final Judgment of Dissolution of Marriage was granted on May 21, 1982 by the Los Angeles County Superior Court. Pursuant to an Agreement of Interim and Partial Distribution of Community Property, Mr. Hagaman was to pay Barbara child support and certain lump sum payments. These payments were made to a UBS account in the name of Xavana Establishment, an entity formed in Switzerland or Liechtenstein.

In 2008, the IRS issued a “John Doe” summons to UBS requesting information relating to U.S. accountholders with undisclosed foreign accounts. In 2010, UBS advised Barbara that it provided information on Xavana Establishment to the IRS. Thereafter, the Fairbanks’ returns were selected for audit. On July 18, 2012, the Fairbanks provided the IRS revenue agent with all documents related to the UBS account for Xavana Establishment, including bank statements. The Fairbanks then filed FBARs to report the foreign account. However, the Fairbanks never filed Forms 3520 or 3520-A. Forms 3520 and 3520-A are required to be filed under Section 6048 for an owner of a foreign account (Form 3520-A) and recipient of foreign gifts (Form 3520).

The Fairbanks argued that the three-year statute of limitations started on July 18, 2012 when they provided all information on the UBS account to the IRS revenue agent. However, the Court ruled that the statute of limitations does not start until the IRS forms, Forms 3520 and 3520-A, are filed. The Court also ruled that because the Fairbanks never advised their CPA about the foreign account, they were not eligible for abatement of penalties due to reasonable cause.

In general, the three-year statute of limitations bars assessment, but the statute of limitations may be extended in certain circumstances including the failure to report a foreign account.

Article By David B. Shiner of Chuhak & Tecson, P.C.

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NLRB Determines Confidentiality and Non-Disparagement Provisions to be Unlawful in Severance Agreements

The National Labor Relations Board (the NLRB or the Board) issued a decision earlier this week that purports to ban confidentiality and non-disparagement provisions from most employee severance agreements.

In McLaren Macomb, the Board scrutinized severance agreements an employer gave to 11 employees who had recently been laid off. The confidentiality provision stated that the terms of the severance agreement were confidential and must not be disclosed to anyone with few exceptions (e.g., the employees’ spouses). The non-disparagement provision barred the employees from making statements to anyone that could disparage or harm the image of the employer or its officers, directors, employees, etc. These provisions are obviously common in severance agreements.

Among other things, the Board determined that both provisions unlawfully prevented the former employees from speaking out about working conditions and compensation (including the severance) offered by the employer and assisting with NLRB and other government investigations. Historically, the NLRB has gone back and forth on whether such provisions are lawful. However, the position taken this week is the NLRB’s most aggressive position to date. Specifically, the Board determined that the mere inclusion of such provisions in a severance agreement is unlawful because they have a deterrent and chilling effect on worker’s rights, even if the employee does not sign the agreement or the employer does not enforce the provisions against an employee who breaches confidentiality or disparages the company after signing.

It is important to note that this decision has some limitations:

  • First, it does not apply to “supervisors” (as defined by the NLRA) or to independent contractors. Who is a “supervisor” under the NLRA involves several factors, including whether the employee has the authority to hire, fire, discipline, or direct the work of another employee. Therefore, it is clear that executives and upper-level management are not covered by this ruling, and, depending on the circumstances, middle and even lower level managers may not be covered either.
  • Second, some have questioned whether a smartly worded disclaimer may permit employers to include limited confidentiality and limited non-disparagement provisions in severance agreements given to rank-and-file employees. For instance, in the past, employers often included a broad statement that the severance agreement is not intended to and in fact does not infringe upon any rights the employee may have under the NLRA. Unfortunately, the Board did not specifically address this issue, but, given the aggressive position taken in the Board’s decision this week, there is definitely some risk of liability even with such disclaimers. That determination should be made based on the employer’s risk-tolerance, along with the circumstances of the individual severance agreement, and is best determined by speaking with legal counsel.

The NLRB General Counsel is expected to release additional guidance on this issue in the coming months. Until that happens, employers should seriously consider this decision when drafting severance agreements.

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