Deloitte’s document review branch hit with $384-million class action lawsuit

A Toronto lawyer has filed a massive class action lawsuit against Deloitte LLP, seeking $384 million on behalf of lawyers who worked at the accounting giant’s document-review branch. 

Deloitte stormed into the document-review game last January, when it acquired ATD Legal Services, a start-up that specialized in outsourced legal work, often assisting on major files for the largest law firms in the city. Founded in 2010, ATD was the brainchild of Shelby Austin, a former partner at Davies Ward Phillips & Vineberg LLP, who continues to oversee the document-review team at Deloitte. Both ATD and Deloitte hired contract lawyers to perform much of the work on a project-by-project basis.

But according to the lawsuit, filed this week by Shireen Sondhi, ATD misclassified the lawyers as independent contractors, when they should have been employees. The suit alleges that this allowed ATD to deprive them of vacation and overtime pay — and to fire them from a project, at whim, without any financial recourse.

The plaintiff is suing Deloitte as a successor employer for the actions of ATD.

At both ATD and Deloitte, according to the statement of claim, some document-review “projects which were projected to last several weeks would end without warning after only a few days, leaving [lawyers] without expected income.” And, the claim continues, lawyers that worked too slowly were sometimes “sent home in the middle of [a] workday.”

If these lawyers were, indeed, independent contractors, this behaviour would be legally sound. But their work bore many of the hallmarks of employment, says Andrew Monkhouse, the lawyer for the plaintiff. None of the document reviewers, he notes, could work from home, use their own computers or negotiate their wages. As Monkhouse puts it, this is “sounding an awful lot like an employee relationship.”


Deloitte might “fall on its sword”

If Monkhouse has his facts right, then his legal analysis is “dead-on,” says David Whitten, a Toronto employment lawyer who has reviewed the statement of claim. “Deloitte had a bunch of ducks in the office and they were calling them geese for convenience,” he says. “If something quacks like a duck, but you call it something else, it’s still a duck.”

Whitten also speculates that Deloitte knows ATD had misclassified its lawyers for years. He points to the fact that, according to the statement of claim, after Deloitte bought ATD last year, the company started to deduct employment insurance and Canada Pension Plan contributions from each contract lawyer’s hourly rate. This is only necessary, he says, if the lawyers are employees.

“Someone behind the curtain realized that these people could be designated as employees, as opposed to independent contractors,” says Whitten. “So, to cover off on that liability, they started treating them like employees for payroll purposes, but without giving them any of the benefits that an ordinary employee would enjoy.”

The lawsuit also alleges that Deloitte did not warn the lawyers in advance of entering into an agreement that it would be making payroll deductions.

The decision to make those deductions, says Whitten, is likely to backfire if the lawsuit lands in a courtroom.

“It’s, in effect, an admission that these people could be employees,” he explains. If Deloitte’s legal defence is that the lawyers have always been contractors, he adds, then the company “is going to fall on its sword.”

The lawsuit names Deloitte and Procom Consultants, a placement agency that manages employment contracts for Deloitte, as co-defendants.

When given an opportunity to comment, Deloitte spokesperson Vital Adam said in an email: “We believe that the claim has no merit and we will vigorously defend the proposed class action. As the matter is now before the courts, it is not our intention to discuss the matter publicly.” Procom did not respond to requests for comment.


The value of the lawsuit is “insane”

Although Whitten agrees with the legal analysis in the claim, he says the damages sought by the plaintiff are “overblown.”

He cites the fact that the lawsuit seeks, on behalf of all potential plaintiffs, $260 million of pay “in lieu of reasonable notice.”

For that number to make any sense, he says, the class action would need to represent almost a thousand lawyers, all of whom earned $150,000 a year. Plus, he adds, they would need to convince a judge that they all deserve a full 24 months of paid notice — the chances of which are “slim to none” because the contracts were short-term, and most of the potential plaintiffs are at an early stage in their careers.

“There’s just no way that there’s going to be that many people out there that are entitled to that much money,” he says. “It’s insane. That part of the claim is so overblown that, on it’s face, it looks ridiculous.”

Employment lawyers, he explains, often inflate the damages they are seeking “for the purposes of generating outrage.” But in this case, he says, it might be a strategic misstep, because, in general, judges evaluate lawsuits with “extra vigilance” if “it’s just not possible that there could ever be that amount of damages.”


Resentment has been “brewing” for more than a year

Monkhouse says his client’s frustration began when Deloitte acquired ATD last January.

After taking over, the lawsuit claims, Deloitte reduced the hourly rate for contract lawyers from $50 to $47. “I think there has been a lot of resentment brewing in the class members from that point,” says Monkhouse.

At the time, to justify the pay cut, Deloitte said that document-review done for its projects would not be legal work — and so, contract lawyers would no longer need to pay for their own legal insurance. (This is a controversial argument in its own right, as reviewers at ATD did have to buy insurance.)

But, according to the statement of claim, Deloitte had another reason for reducing the hourly rate for contractors: the company wanted to use the extra cash to pay placement “fees levied by Procom” Consultants.

So far, Sondhi is the only lawyer listed as a plaintiff, but Monkhouse says “many” of Sondhi’s colleagues have expressed support for the claim.

Now that the lawsuit has been filed, a judge will have to certify the class action, which, according to Whitten, might not happen for six months to a year. If the action is certified, then everyone who has performed document review for ATD or Deloitte as an independent contractor will automatically become a plaintiff, unless they opt-out of the lawsuit.

Photo: Grid Engine

Making It Work: What Shelby Austin does all day

Shelby Austin admits that her career has moved at “warp speed.”
 In 2009, at 28, she made partner at Davies. Then, in 2010, she quit to found ATD Legal Services — a start-up taking on outsourced legal work, such as document review, for a fraction of the average billable rate on Bay Street.

It took off. And last year she sold the business to Deloitte for a tidy sum. These days, Austin oversees the accounting behemoth’s 12-person out-sourcing team and more than 100 contract lawyers. In the last five years she also got married and had a daughter. (At press time, she was days away from giving birth to her son.)

How does she do it? We break down a typical day in her whirlwind life.

6:45 a.m.
Austin wakes up, showers and gets dressed, “usually in boring black or grey.” All in 15 minutes. (She saves time in the morning by getting her hair blown out at Blo a few times a week.)

7:00 a.m.
Along with her husband, Graeme Cooper, a VP at the Carlyle Group, she wakes up their 19-month-old daughter, Simone. The trio kicks off the day with a full hour of playtime. “She plays a ukulele, that she calls her guitar,” says Austin. “She’ll rock out, usually singing about letters: the alphabet is a pretty big deal right now.”

8:00 a.m. 
Their nanny, Yojanna, arrives to look after Simone for the day. “She’s been with us since Simone was three months old. She’s fabulous. She teaches our daughter Spanish.” Then Austin and her husband hop in the car and head downtown to work.

8:15 a.m. 
Austin arrives at Deloitte Canada’s head office. But, before taking the elevator up to her office, she makes a pit stop at Starbucks for breakfast. “I eat a lot of those Greek honey yogurt parfaits,” she admits. “Like, a lot.”

8:30 a.m.
Austin walks into the office and quickly checks in with the outsourcing team, keeping small talk to a minimum. “At Davies, I used to walk down the hall and kill an hour in somebody’s office because we were going to be there ’til four in the morning anyway,” she says. “Now, I’m like, ‘I’m leaving at 5:30 no matter what,’ so that puts pressure on the day.”

8:45 a.m.
A typical morning consists of a series of calls with clients — which include most of the big firms in Toronto. Because law firms typically only hire Deloitte once they have a major case or merger, Austin has to “stay in touch with clients even when there’s nothing going on.” This is the biggest part of her job: finding new business. And she likes making calls in the morning when her mind is at its sharpest.

Shelby Austin

Shelby Austin
Partner, legal project solutions at Deloitte Canada
Year of Call: 2006

11:30 a.m.
Every single day, she has a lunch date with a client — a habit Austin developed early in her career. She’s a regular at The Gaberdine, Bymark and Ki, and she always opts for the healthiest dish she can find. Her favourite at Ki, for instance, is the maple teriyaki salmon with wilted spinach, and she usually forgoes potatoes.

1:30 p.m.
Back in the office, Austin handles basic admin: writing performance reviews, planning her long-term strategy and meeting with the Deloitte upper brass.

2:30 p.m.
Although she holds a managerial position, Austin often spends her afternoons in Deloitte’s open-concept work area, sifting through emails or marking up financial documents with the rest of the outsourcing team. “I’m more actively involved than one might think.”

5:30 p.m.
“No matter what, no matter what,” Austin stresses, “I leave the office at 5:30.”

6:00 p.m.
Austin picks up her husband and they head home together to relieve Yojanna, who first gives them a run-down of Simone’s day.

6:15 p.m.
Cooper always makes dinner. “If I didn’t have a husband who was so amazing, I would be happy eating take-out seven nights a week,” Austin says. “I outsource anything that does not give me joy.” After dinner, the couple spends another hour of playtime with their daughter.

7:15 p.m.
She puts Simone to bed with the three Bs: bottle, bath and book.

7:30 p.m.
Three times a week — Monday, Wednesday and Friday — Austin does an hour of exercise with a personal trainer at the house. In a makeshift gym area in her basement — with a yoga mat, dumbbells and a few resistance bands — she does a mix of aerobics and strength training.

8:30 p.m.
Austin cracks open her laptop, checks her email and gets back to work. “I’m not going back online because I have to. Or because I feel that the business needs me to survive,” she explains. Rather, she genuinely wants to work. “I’m very lucky that I’ve always loved my job. And that’s not bullshit.”

11:00 p.m.
Austin winds down at the end of the day by nerding out on business books. Or, sometimes she’ll watch business classes offered online by Stanford University. (At the moment, Austin is binging on a course called “How to Start a Startup,” which features lectures from the founders of PayPal and LinkedIn). “It sounds more hardcore than it is,” she says. “It’s actually quite fun for me.”

12:00 a.m.
Austin flicks off the lights and goes to sleep. At least, that’s the goal: “If a client emails me at midnight,” she says, “chances are I’ll respond.”

This story is part of The Precedent guide to getting it all done, from our Spring 2015 issue.



Photography by Daniel Ehrenworth

Making It Work: The Precedent guide to getting it all done

Precedent Spring Issue 2015 CoverLet’s face it: in order to a lawyer (and a damn good one at that), it means that you are making a commitment to a profession that demands a lot of time and energy. But that doesn’t mean you want to sacrifice the rest of your life.

So how does it all get done?

You’ve got to be resourceful. You’ve got to let some things go. And you’ve got to work hard to achieve balance.

Find out how some of Toronto’s most productive lawyers are killing it at the office and making time for their hobbies, vacations, families, fitness and even sleep. Don’t believe us? Check out the stories below:


Angela Chaisson

How Angela Chaisson finds time to go for lunch with her firm every day

Cornell Wright

How Cornell Wright finds a way to make it to soccer practice

Bindu Cudjoe

How Bindu Cudjoe makes time for friends, family and annual vacations








Unfiltered advice from lawyers with kids

Shelby Austin

Learn from Shelby Austin’s day planner

healthy lawyer

How to keep your job from killing you







Photography by Daniel Ehrenworth

Illustration by Naila Medjidova

Deloitte adds legal start-up to the fold

Deloitte has announced the acquisition of one of Canada’s fastest-growing companies, ATD Legal Services Professional Corporation. The purchase of ATD, which specializesin e-discovery, allows Deloitte to become Canada’s first end-to-end discovery solution.

In a 2010 Precedent interview, ATD founder, Shelby Austin, said that people thought she was crazy when she left her position as partner at Davies Ward Phillips & Vineburg LLP to start the company.

At that time, outsourcing the discovery process — the pre-trial process in civil litigation through which documents and evidence (especially electronic documents like emails) are acquired from the opposing party — was a “fringe” concept.

The move allows Deloitte to collect, process, host and review data without that data ever leaving the country, an advantage for those concerned about privacy. Thus the acquisition of a Canadian-owned company was a priority.

“From our standpoint, it was the only step [of the discovery process] that we had not internalized already,” says Peter Dent, a partner at Deloitte and national leader of their forensic practice.

The pool of companies that specialize in e-discovery is quite small, and the pool of Canadian companies specializing in e-discovery is smaller still.

“I think we did a pretty good job of taking it to where it was,” says Austin, “but our growth was so fast that it’s really nice to think that we have a larger infrastructure and support working for us now.”

Austin is thrilled about the sale, even though she says that every day of work as an entrepreneur was a gift. “But how could you begrudge your baby going off to University early?” 

Photo by Vanessa Heins