Montreal skyline.
We took a look at the hottest trends north of the border, and discovered that some of the same shifts that have impacted the U.S. legal market are also being felt in Canada. More younger lawyers are moving in-house, and the traditional associate-to-partner track isn’t the only career path that law firms offer these days. But some developments are more uniquely Canadian. French-speaking Quebec is seeing new economic growth that is driving work to both independent and global firms, and the imminent national legalization of marijuana—medical and recreational—means that firms across the country are high on new cannabis practices.
Going In-House
Just as in the United States, Canadian in-house legal departments have grown over the last two decades, and the trend is continuing.
According to a 2017 Deloitte survey titled the “Canadian legal landscape,” 41 percent of Canadian general counsel said they planned to increase head counts in their legal departments.
They probably won’t have trouble filling those positions, either. “When we first opened our doors [in 1997], I was amazed by how many associates wanted to go in-house,” says Christopher Sweeney, one of the co-founders of Canada’s ZSA Legal Recruitment. “And that demand has remained unabated over the last two decades.”
Companies that had no legal departments 20 years ago now have small legal departments and, in turn, companies that had small legal departments now have large legal departments, Sweeney adds. By contrast, the head counts of Canadian law firms have remained fairly stagnant since the Great Recession. “In Canada, we’ve had basically zero growth in the size of law firms over the past 10 years,” says Sweeney.
Toronto.
Nor have salaries for associates risen in Canada over the same period, he says—a factor that has handcuffed law firms in their retention efforts. A first-year associate entering the market today makes roughly the same amount as her counterpart 10 years ago, thanks to a dearth of work following the Great Recession, Sweeney estimates. He notes, however, that just within the past month, some Canadian firms in the Toronto market such as Borden Ladner Gervais (BLG) have bumped up their salary offerings to their first-year associates.
Still, the broader salary flatness at firms, coupled with a perceived better work/life balance in corporations, has made in-house positions much more attractive to attorneys.
“The firms have been bleeding associates to in-house departments at a regular pace for years, and if anything, it’s getting to be a greater flow,” says Sweeney, who estimates that the in-house hiring marketplace will increase 5 to 10 percent per year.
Not all firms are looking at the movement as negative. “If you take a long-term view of talent, and you take a view that you’re here to help people fulfil their potential wherever that might be, then I think [this] just changes your philosophy on talent,” said BLG chief talent officer Phil Donnelly.
“I think it’s a very healthy outcome if a lawyer at BLG decides to go to one of our client organizations in an in-house role, and they leave favorably exposed towards the firm with that strong connection to the firm, believing they were developed as a lawyer and that they were treated well in the management of their transition,” Donnelly says. “The likely long-term benefit to BLG is significant, either reputationally or economically.” In addition to equity partner and counsel paths for associates, he says, BLG also offers client secondments to its lawyers who want to see if the in-house career path is for them.
Law Firms Change Shape
As in-house departments continue to grow, law firms in Canada, like those in the United States, have begun restructuring to accommodate their clients’ needs.
A 2017 Deloitte study on the Canadian legal structure found that over the last five years the number of equity partners has decreased across Canadian firms while the number of nonequity partners has jumped nearly 50 percent. The number of associates over the same time has remained fairly consistent, according to the study.
These changes have broadened the middle ranks in law firms, creating more of a “diamond” model than the traditional law firm pyramid structure.
The Deloitte study noted that this shift may assist with millennial retention and succession planning, a common issue among firms in Canada. Eighty-nine percent of law firms surveyed by Deloitte said that engaging and retaining millennials was a key issue, and 72 percent of the firms surveyed said staff retention and succession planning were important strategic priorities. The study suggested that the advent and growth of the nonpartner track and career associate positions will better align with the career aspirations of a millennial workforce, who prioritize flexibility and work/life balance.
Matthew Peters, a partner in McCarthy Tétrault’s technology group, says he believes that this creation of a nonpartner track group is a positive development for the profession, as it allows younger lawyers to craft different work experiences for themselves in the changing legal market. “You have more options available from a career path perspective,” Peters says. “[It's] not like there’s only one path.”
Peters isn’t alone in that thinking. Nearly 60 percent of firms surveyed by Deloitte said they currently have nonpartner track associates. At those firms without these positions, 74 percent are contemplating creating them.
It’s not just the alternative career aspirants who could benefit from this new system, Peters adds. “Some of these off-track positions are sort of freeing up some of your on-track lawyers earlier on in their careers so they can actually engage in more sophisticated work directly with the clients earlier in their practice,” he says.
Jordan Furlong, a Canadian legal analyst and consultant, agrees that the growth in the nonequity ranks in law firms will likely help retain millennial attorneys in Canada. “The options have always been up or out,” says Furlong.
What’s more significant, he says, is that this growing sector of the Canadian legal market illustrates that the terms “partner” and “associate” are no longer adequate terms to describe the role of lawyers in firms.
“For the longest time, you needed the people who owned the firm and who benefited from the sweat of those below them, and you needed those who were employees of the firm who labored away in hopes of one day becoming those who could benefit from the laborers,” Furlong says. “But it’s a different market now and the work is not coming in nearly as steadily or in nearly as much volume. Clients are making it very clear they’ll pay for high-value stuff, they’ll pay for expertise and insight and truly useful valuable information, but for the most part you’re not going to get that from the work that associates are assigned,” he adds.
Furlong says he doesn’t see the bulge of nonequity partners within firms as a permanent change. It’s not a sustainable model, he asserts.
“I feel like we’re in a transitional phase, and the nonequity partner placeholder is a part of that, where we’re moving away from the idea of a lawyer as a source of leverage labor and moving towards the idea of lawyer as a significant value contributor within the firm,” he says.
Making It in Montreal
After years of high unemployment, corruption and a crumbling infrastructure, Montreal is experiencing a mini-economic boom.
According to a report by the Institut de la statistique du Québec, Quebec’s economy grew faster than the overall Canadian economy in the first three months of 2017 and outperformed it in three of the past four quarters. In June, Standard & Poor raised Quebec’s credit from A-plus to AA-minus, a rating better than neighboring Ontario’s. Montreal’s jobless rate also fell to 7.3 percent in 2016, its lowest since Statistics Canada began tracking the numbers.
This resurgence, due in part to a strong real estate sector, has led to growth across Quebec’s many industries, including aerospace, life sciences and technology. Internet juggernauts like Amazon Web Services and Google Inc. have invested millions in opening up data centers in the last year in and around Montreal. And this has led to a plethora of work for law firms in La Belle Province.
“Quebec [and] Montreal in particular right now [are] really getting out of the shadow in all kinds of ways,” says Anik Trudel, CEO of Lavery de Billy, a regional law firm with offices in each of Quebec’s major business centers: Montreal, Quebec City, Sherbrooke and Trois-Rivières.
“There’s really a very new energy [in] Montreal, which I certainly think will redefine or certainly help redefine the legal market,” Trudel adds.
Quebec’s legal market is unique compared to the rest of Canada’s, due in part to its specific regime, she notes: A civil code and cultural differences creates an advantage for firms on the ground when it comes to capturing legal work from companies within the province.
“Your credibility really varies depending if you’re onsite or not, and this also provides an edge and it’s quite typical of Quebec,” Trudel says. “Quebec is rather territorial and regional.”
Over the years, various national and international firms have merged with local firms in order to corner the unique Quebec marketplace. Toronto-based Davies Ward & Beck moved into the city in 2000 in a merger with Montreal-based Phillips & Vineberg to become Davies Ward Phillips & Vineberg. In 2011, Norton Rose Fulbright’s predecessor firm, London-based Norton Rose Group, expanded into the Canadian market with a tie-up with Montreal-based Ogilvy Renault.
Lavery, with nearly 250 lawyers across its four offices, made the decision to remain independent and regional, however. “[It] has allowed us to stay really close to our clients and their business environment, so I think we’re really recognized by our clients to kind of have our ear to the ground,” Trudel says.
Cannabis in Canada
In April 2017, the Canadian government introduced sweeping legislation that next year will make the country the first industrialized nation to legalize recreational and medical marijuana. Canadian lawyers are helping clients prepare for the July 1, 2018, legalization deadline.
“When you have a sector as significant as this is, or is expected to be, that’s coming online, it has a really broad impact across a wide range of practices,” says Alexis Levine, a partner in Blake, Cassels & Graydon’s cannabis group. “So this isn’t just about giving advice to current or aspiring license producers who want to grow or distribute cannabis. We have a very broad client base and have to provide service to that whole client base and so the areas that are affected are innumerable.”
Clients in the real estate sector need counsel on how to handle leasing requests from businesses that may want to be in the cannabis space; capital markets clients are looking at raising money in the sector; and financial institutions are working to navigate the regulatory and anti-money laundering landscape, Levine notes. There are also employment, environmental, intellectual property and patent issues to be sorted out.
“The legislation that we have is fairly skeletal, and a lot of details are left to the regulations, and so we don’t yet know a lot of what we don’t yet know,” Levine says. “And even once we have regulations, there will be some things that will only develop over the course of time.”
Bennett Jones was one of the first national Canadian firms to step into the cannabis space back in 2014. “We got involved because we saw an opportunity—although it’s been fast-forwarded—that there would be access on the medical side to cannabis, and that it could potentially become a practice area,” said Ranjeev Dhillon, a partner in the firm’s cannabis practice.
Since then, Bennett Jones’ team, which includes the head of its IP litigation practice Dominique Hussey and corporate and securities partner Aaron Sonshine, has worked with clients across various sectors on a range of initial ventures during the cannabis sector’s infancy. “A lot of the current executives in the cannabis space are former mining executives so [there is a] similar mindset—high risk, high reward and investors willing essentially to gamble at the time on early stage investments with the potential for a big return,” says Sonshine.
The cannabis space is likely to evolve rapidly, he says. Under the current law, licensed producers in Canada will be limited to producing the dried bud of the marijuana plant and some oils. Marijuana edibles—food or drinks that are infused with cannabis—will be illegal, although that could change, Sonshine says.
“We’re advising clients not only on the law as it exists today but on future opportunities and how they can prepare for the eventual opening, or so we think, of the Canadian market towards things like edibles,” Sonshine says.
In Canada, the recreational marijuana regime will follow the same model as used to oversee medical marijuana. The production and licenses for the production of cannabis will be governed federally, but distribution will be governed largely by the provinces, explains Levine.
“Each province has the ability to determine what their rules are for distribution and, in addition, many municipalities, if there are going to be real outlets for example, [they will] have municipal licensing obligations or opportunities to regulate those businesses as well,” he says.
With legalization only nine months away, public perception of the changes varies widely among Blake Cassels’ clients and Canadians in general, says Levine. “There are lots of folks who see this as a good development from the perspective of regulating something that is probably happening anyway and generating tax revenue and better public health protection as a result of that,” says Levine. “There are folks who see this as a business opportunity, and there are folks that are nervous about the impact of this on their business and want to better understand how to navigate that.”
