Mustn’t grumble?
The Legal Ombudsman has been in crisis for several years. Neil Rose looks at how bad it has got at dealing with complaints and whether it is finally turning the corner
The Legal Services Act 2007 consists of three main pillars – independent regulation, alternative business structures and independent complaints handling – and, in the first few years of the new regulatory settlement, it was the Legal Ombudsman (LeO) that appeared to be the most successful.
But when, in 2014, the National Audit Office qualified the accounts of the Office for Legal Complaints (OLC) – LeO’s official name – it began a downward spiral that has seen the kinds of delays in dealing with complaints that, more than a little ironically, LeO would condemn if it were a law firm.
If an organisation like LeO cannot live up to the standards it expects of those it oversees, then it has a major credibility problem.
Reaching a nadir
LeO reached a nadir just as the pandemic hit. The application from the governing board of the OLC for a 21% hike in its then £12.3m budget was rejected by the Legal Services Board, which said the budget was “inadequately evidenced and does not make out a sufficient case that the increases asked for will lead to the improvements in performance modelled within it”. This was in the context of “a historical pattern of failure to meet the existing performance targets”.
The oversight regulator was also very worried about LeO’s “weak culture in terms of leadership, change management, systems and governance”. But apart from that…
As a result, the OLC pulled its proposal and instead presented a revised budget that simply increased the current figure by inflation.
This was all at a time when low-complexity cases were taking at least six months to resolve, twice the target time, and the pre-assessment pool – cases that have been accepted but not yet been allocated for investigation – was growing ever larger.
Behind all this have been spectacularly bad staffing issues. Back in March 2020, attrition levels were 22%, with half of new starters leaving within their first two years, while over 50% of staff told a staff survey that they wanted to leave in the next 12 months.
By anyone’s standards, this was a crisis. There are signs, however, that LeO is recovering, slowly. But the figures may have to get worse before they get better.
New leadership
What has changed in the past two years is new leadership and a commitment to transparency. The chair of the OLC since April 2020 is Elisabeth Davies, who was very familiar with the legal world and indeed LeO, as a previous chair of the Legal Services Consumer Panel.
She made clear from the start of her tenure that a restructuring of LeO’s leadership team was critical; indeed, she highlighted “the lack of senior operational capability and capacity within the LeO management team” as a significant factor in its budget being rejected.
In January 2021, Paul McFadden took over as the chief executive of LeO and chief ombudsman, having recently served as acting Northern Ireland Public Services Ombudsman and Local Government Commissioner for Standards. A new chief operating officer also joined.
"At its height, the pandemic reduced LeO’s capacity by a third, although there was no reduction in the number of complaints coming through its doors"
Nonetheless, the pre-assessment pool (PAP) has continued to go up, from less than 2,000 in 2019 to 5,000 two years later. So the budget had to go up again, with a 13% increase to £14.5m agreed for 2021/22 (the OLC had originally asked for 19%). This would help reduce the PAP, albeit modestly in the first year, to 4,700.
But this cannot go on forever, LeO was told. In a letter to Ms Davies, LSB chair Dr Helen Phillips said: “The board was clear that it needs to see results this time, following a history of promises of improvement that have failed to materialise.
“The board expressed confidence in the OLC’s leadership, but should the expected benefits not materialise, then we would be justified in calling on the government to pursue alternative arrangements to deliver effective consumer redress in the sector.”
Of course, Covid has not helped – at its height, the pandemic reduced LeO’s capacity by a third, although there was no reduction in the number of complaints coming through its doors – the ombudsman generally receives around 110,000 contacts a year which boil down to some 7,000 cases being accepted for investigation.
Staff shortages
So where are we now? Well, LeO’s draft 2022/23 budget and business plan published last November admitted that recovery would take longer than it anticipated, with what was expected to be a two-year “improvement trajectory” until 2023 taking at least a year longer. Disturbingly, the PAP was set to increase from 5,000 to 6,700 by March 2022.
It sought a minimum 3.8% increase (or £550,000) on its £14.5m budget but said an extra 1.3% would enable it to pursue more “radical” reform.
Mr McFadden said: “Our progress is being critically undermined by not having the required number of people in the business and significant shortages in the labour market at a time when we are upscaling and investing in new investigative teams to address the backlog.”
LeO said it needed to improve its employment offer – as well as struggling to recruit, two-thirds of those who left cited better pay and/or prospects elsewhere. It also acknowledged that there was “still too much variation between staff who are performing at the expected level and those who are not”.
The staff problems made it difficult to balance business as usual alongside improvement initiatives, the consultation said, and as a result the organisation was behind the trajectory of performance improvement and recovery it had set itself.
The LSB has approved LeO’s £15.3m budget, saying it “recognised some recent signs of stabilisation and recovery as well as a greater willingness by OLC to embrace radical change options”. Mr McFadden explains that efforts to close cases more quickly are having a positive impact on performance.
He said the PAP will not be as large at the end of its financial year on 31 March as the consultation had anticipated – at least 400 less than 6,700.
LeO has already put a number of initiatives in place, including telling complainants when the legal services provider has made a reasonable offer (meaning it’s not worth pursuing the matter), guided negotiations, using ‘nudge’ strategies, and creating the post of general enquiry team investigator, whose role is to produce “investigation-ready files” and close low-complexity cases at an earlier stage.
The first two have helped settle around 900 cases in 2021/22. “It’s a lot less resource to achieve that outcome and the early indication is that they reduce journey time by 50%,” Mr McFadden says.
The OLC is also consulting on a raft of changes to the scheme rules (see box) with the aim of resolving cases more quickly. Key to this all is making the system less rigid. Though the intention was for LeO to resolve complaints “with minimal formality”, he says, there are aspects of the Legal Services Act provisions and scheme rules “that tend to do the opposite”.
Long-running staff shortages are finally being dealt with
One long-standing issue is that far more complaints go all the way to a full ombudsman decision than was ever anticipated and is seen in comparable schemes. This may say something about lawyers, but in 80% of cases, the ombudsman nonetheless follows the investigator’s recommendation.
“We need to start managing that better,” Mr McFadden says. “If you see cases at an early point that there’s going to be very little need for investigation to get to the right point, why should there be multiple layers?”
But he argues that the service had now reached “a point of stability in terms of performance”, meeting targets for five months running, with the new ways of working delivering “a lot more quickly” than expected.
Perhaps most significant of all is that long-running staff shortages are finally being dealt with. LeO is no longer restricting recruitment to the midlands, where it is based and has struggled to fill vacancies. It is now looking for staff nationally, through potentially creating ‘hubs’ elsewhere in the country as well as more hybrid and remote working. As a result, a campaign over the autumn and winter attracted 900 applicants. Some 41 investigators are joining the organisation in March, actually 12 more than presently needed in anticipation of attrition in the coming months.
The plan is for the PAP to fall to 3,000 by March 2023 and a “working level” of 600-1,000 in 2024. Once it is under control, Mr McFadden says LeO should be able to make decisions on cases “within weeks”.
Delicate situation
LeO remains in a delicate situation and the threat of the LSB deciding to find a new way to deal with complaints still hovers over the organisation. Despite the modest progress, there is a huge backlog of complaints to clear and it would not take much to derail improvements.
"The threat of the LSB deciding to find a new way to deal with complaints still hovers over the organisation"
This could come from a dispute that has blown up with the Public and Commercial Services (PCS) union, which is seeking formal recognition to introduce collective bargaining for LeO staff. Despite the positive picture painted by Mr McFadden, the union said, it was “obvious” that LeO was in an “escalating crisis” and “complete disarray” as the attrition level continued to rise.
In a statement, the PCS said: “Over the last 12 months, LeO has lost almost 22% of the permanent staffing resource yet the chief ombudsman continues with the mantra that the senior management team’s assessment is that ‘things are going well’. It is evident that there is a complete failure to grasp the serious and significant concerns.”
If an organisation with more than 21 employees does not agree to recognise a union, the union can apply for statutory recognition from the Central Arbitration Committee. This could involve a ballot of employees, following campaigns by both sides and the PCS said it would do this if it had to.
In response, Mr McFadden insisted that LeO has been “open and transparent” about the issues it faced: “Over the last year we have worked continuously to engage with our people, listen to their ideas and suggestions for improvement, and, together, deliver new ways of working.
“As a result, we have stabilised the organisation, delivered on performance targets for five consecutive months and are on course to deliver 32% more customer outcomes in 2021/22. Staff productivity has been increasing across the year, and investigation times are 16% quicker than at the beginning of 2021/22.”
Mr McFadden said LeO’s success depended “first and foremost” on its staff “and we will continue to listen and engage with our staff as our recovery progresses and as we maintain our focus on making LeO a great place to work”.
From where LeO was, this is a big challenge. There is no doubt that the organisation is moving in the right direction and being more open about its performance and challenges. This is to be welcomed. But it is far from out of the woods.
Reforming how LeO deals with complaints
The OLC is currently consulting on changes to the scheme rules that would provide the flexibility to resolve cases more quickly. These are the key proposals:
Time limits
A complaint can currently be brought within either six years of the act/omission or three years of the date of awareness, broadly mirroring court time limits for contractual claims. The OLC says this can make complaints difficult to investigate and proposes reducing the limit to a year. Around 30% of complaints received in the last year could have fallen outside of this new limit, although there would be discretion to extend it if fair and reasonable to do so – such as a client not wanting to raise a complaint whilst their matter was ongoing.
Discontinuing and dismissing investigations
An ombudsman can only dismiss or discontinue a complaint after it has been accepted for investigation, even if there is little, if any, benefit in having an investigation. An ombudsman is currently asked to exercise their discretion to do so in around one in seven cases, a request approved 80% of the time. The proposed new rule would allow an ombudsman to exercise their discretion, if fair and reasonable to do so, without the need to first accept it for investigation.
The ombudsman can also exercise their discretion where satisfied the complainant has not suffered any financial loss, distress, inconvenience, or other detriment. The consultation proposes changing ‘any’ to ‘significant’, so as to introduce proportionality.
The OLC wants to extend the rule that allows an ombudsman to dismiss a complaint if satisfied the complainant has rejected a fair and reasonable offer made during the lawyer’s internal complaints procedure, to cases where a complainant has rejected a reasonable revised offer made during the LeO investigation.
Another change would permit LeO to dismiss a complaint where its nature and scope, the volume of evidence, or the complainant’s conduct “is such that it would be disproportionate for an investigation to be carried out”.
A further reform would allow LeO to dismiss a complaint if there has been undue delay on the part of the complainant; this would assist with cases where complainants sought to add issues they had not raised originally with their lawyer.
Decision-making
Around 40% of complaints are ultimately referred to an ombudsman to make a formal decision – a figure far higher than other ombudsman schemes. The final decision mirrors that the investigator’s recommendation in around 80% of cases and the OLC wants the power to delegate this decision-making.
While full delegation requires a change to the Legal Services Act, in the meantime the consultation proposed a new rule to enable an ombudsman to conclude that a final decision was not needed on a case if no substantive issues (such as an error in fact or law, or additional new evidence) have been raised in response to the investigator’s findings.
Such a case would be deemed to have been resolved by the investigator’s findings, but the ombudsman would have the discretion to pass a case for final decision anyway if, for example, there were vulnerability issues or there was significant public interest.