The Future Lawyer Weekly Briefing – W/C 5th June 2023

IMPROVED PARENTAL LEAVE POLICIES FOR LAW FIRMS

It is safe to assume that many lawyers are parents; however, being a legal professional and taking parental leave still appear unrelated primarily due to the highly competitive nature of the legal sector and the anxieties accompanying parental leave.

Whilst taking maternity leave is met with lesser contempt, the same cannot be said for paternity leave.

On May 19, 2023, Clyde & Co announced it had taken positive steps to allay parental leave fears by effectuating an all-inclusive parental leave policy from May 1, 2023.

Obstacles encountered

Like in every other profession, law professionals struggle to balance parental responsibilities with their careers. Professionals enter this environment with perhaps an unconscious naivety that they could quickly achieve a balance between remaining apex employees whilst fully supplementing their caregiving responsibilities.

However, there are challenges particular to the legal profession; it is a high-performance sector, the hours are unforgivable, and it is the norm to encounter inflexible working practices and heavy workloads that seem devoid of termini.

Whilst employers and legislation heavily support maternal leave, paternal leave is comparatively legislatively uncatered for despite the ongoing shift of traditional caregiver roles and the introduction of The Shared Parental Leave Regulations 2014.

Further, there appears to be bias from within the sector, unwritten and informal rules, mainly directed towards paternal leave takers. For instance, fathers face retribution or risk ridicule for wanting to avail themselves of parental leave, even more so if the leave is to be extended.

In the main, for male and female leave takers, there is the supposition of diminished capabilities and unwarranted and unfair assumptions concerning work ethic and commitment, with the added pressure that they should remain available to firms during leave.

Clyde & Co’s enhanced parental leave policies

External factors influence the amount of leave a parent would prefer to take (if any), such as the cost-of-living crisis, financial capabilities and care-sharing arrangements. However, there is palpable fear and guilt when such needs arise.

Clyde & Co is not the first law firm to execute parental leave policies to help employees achieve a progressive work-life balance. For instance, Latham & Watkins ‘offers up to 40 weeks of enhanced pay for maternity, adoption/surrogacy, and shared parental leave periods in addition to the statutory right to a further four weeks of unpaid leave’, and Ashurst, in 2021, offered 26 weeks of fully paid non-gender specific leave to ‘recognise the diversity of family life’.

Clyde & Co’s parental leave policy has augmented many of the existing policies, with the primary provisions as follows:

• All partners and employees across its global network, regardless of gender and whether they are primary and secondary carers of direct descendants or adoptees, are now entitled to 26 weeks of fully paid leave unless respective national legislation permits more.
• Parents with children in neonatal care can take up to 12 weeks of additional fully paid leave.
• Four weeks of fully paid pregnancy loss leave (for loss before 20 weeks) are available to anyone directly suffering pregnancy loss.
• The provision of ten days of fully paid leave for fertility treatment.
• The availability of parental transition coaching and parental leave sponsorships for fee earners.

Notably, the new policy is also retrospectively available to those already on parental leave and recently returning to work.

Impact on the legal sector

As Carolena Gordon, a senior partner at Clyde & Co, states: ‘having access, no matter your gender, to consistent and flexible parental leave is crucial to so many people’.

From an employee’s standpoint, such flexibility and empowerment enable parents to better care for their children, whether after birth or adoption and for as long as possible. Further, it demonstrates that a firm cares for its employees’ values and well-being.

Promoting a better work-life balance boosts staff morale and leads to higher staff retention, reduced turnover, and better job performance, with greater profits generated for a firm. Also, there is the added incentive of the reduced risk of litigation action brought by employees against firms for discriminatory practices concerning parental leave. Therefore, it is likely that other firms will soon follow suit.

Suffice it to say that Clyde & Co’s enhanced policy and those of others who have previously sought to alleviate the burden of balancing work and caregiving responsibilities are highly welcomed within the legal sector.

Article written by Aqua Koroma

CRISIS IMPENDING AND AVERTED: THE US DEBT CEILING

The US debt ceiling, or debt limit, is legislation limiting the amount the US government borrows to settle its debt obligations. These obligations include interest payable on its national debt, the salaries of federal employees, military stipends and Social Security.

The Public Debt Acts of 1939 and 1941 granted legislative power for the amendment of the ceiling depending on the spending needs of the US government. Under Section 8 of Article 1 of the US Constitution, Congress can authorise borrowing based on the government’s creditworthiness.

The limit, set at $31.4 trillion through previous amendments to the debt ceiling, was surpassed in January 2023. Janet Yellen, the US Treasury Secretary, had recently warned that not increasing or suspending the debt ceiling would lead to the US failing to meet its financial obligations.

Said dereliction would mean the US’s first intentional federal default as soon as June 5, 2023, proving a cataclysmic event for the US and the global economy. A wilful default is the absence of means required to settle obligations; however, it is essential to know that there has never been a time when the US government has been unable to pay its debts. In times of delay, the US Treasury provides cash and ‘extraordinary measures’ to prevent defaults, some of which they currently have in place till early June 2023.

Background

Treasury securities, that is, bills, bonds and notes, are issued by a government to generate monies to meet its public spending and debt obligations. The stakes are purchased by investors such as other governments and private investors as long-term investments.

Interest in these securities is high as they are considered safe, even more so with governments, such as the US, carrying a zero-risk weighting under international banking regulations. The sale of these securities imposes debt obligations on a government on which interest is payable to the investors.

Typically, government debt is credit rated, with the highest being AAA (outstanding). Should the debt retain the highest credit rating, it renders surety that the government will meet its debt obligations. If it is downgraded, for example, to AA+, a government will be adversely impacted by this downgrade; it would mean reduced borrowing power and, subsequently, higher interest rates payable on borrowing, leading to a struggle to sustain its commitments.

Currently, US government debt is rated AA+ by S&P Global Ratings and AAA by Fitch Group and Moody’s (the ‘Big Three’ in international credit ratings), with the former ‘anomaly’ a result of the US Congress’s failure in 2011 to raise the debt ceiling in time to allow the government to settle its debts before maturity.

Non-payment or the late repayment of its debt obligations would thus spell catastrophe for the US, hence the reason for the recent unease surrounding the delay in reaching an agreement on whether to suspend or raise the debt ceiling to meet obligations which increased primarily due to deep tax cuts and high public spending.

Impact of failure to meet debt obligations

The world economy is currently navigating a panoply of issues – from geopolitical confrontations to include Russia’s war with Ukraine, post-Covid recovery, the threat of Covid-19 resurgence, rising and prolonged inflation and interest rates, and the costs of climate change.

The US not meeting its obligations, especially on interest payments, will further exacerbate an already fragile state of affairs as follows:

The country will default, and its credit rating will be downgraded. The US dollar’s position (already under increasing threat from the euro and yuan) as the world’s de facto currency will further diminish. Its economy would contract, the loss of jobs inevitable (with a guestimate of 7 million within a year), and the country will go into recession. Also, the government could face litigation from investors and those who rely on the public purse.

Internationally, already high interest rates will rise even further. Global trade will be impacted owing to the reduction in the purchase of goods and services from overseas by the US government, consumers and businesses, along with a decline in exports from countries that rely on US trade.

Cross-national business and legal contracts depending on the dollar as means of settlement or payment would be affected owing to the dollar’s inevitable decline.

Also, governments would impose contractionary economic policies. Said policies would mean central banks deviate from their usual objectives due to the need for more liquidity, translating into the reduction of lending, making credit expensive to procure. Inevitably, such measures would reduce demand for consumer and business products, thus decelerating economic growth, circumstances antithetical to stimulating the global economy.

The Fiscal Responsibility Act

The crisis was averted as President Biden and the Republican House Speaker Kevin McCarthy negotiated an agreement, thereby bypassing a worrying bipartisan standoff, with the deal being accepted by the Republican House and subsequently Congress and as situated in the Fiscal Responsibility Act of 2023.

In addition to other measures, the Act temporarily suspends the debt ceiling until January 1 2025 (with automatic reinstatement of the limit on January 2 2025, to the then outstanding debt), amended eligibility requirements for social security claimants, imposed strict limits on military and discretionary spending for the next two fiscal years and ended the moratorium on student loan repayments which cost US taxpayers an estimated $5 billion a month.

Overall, the Act primarily seeks to curb previous high spending and increase tax income, thereby attenuating the need to raise the debt ceiling soon. Thus, for now, the world can breathe a sigh of relief.

Article written by Aqua Koroma