Ashurst head of human resources Richard Knox confirmed the firm had identified underpayments for staff covered by the legal services award, which includes paralegals, legal assistants and law graduates.

“As soon as we were made aware of the additional payments owed to staff, we acted to ensure all necessary adjustments were made to current and former staff affected, including interest, superannuation and leave balances adjusted where applicable. This process is almost complete,” he said.

“We have made the necessary changes to ensure, moving forward, all payments owed to our staff for work performed are properly accounted for and made on time.”

Underpayments of salaried staff through unpaid overtime is the same issue that resulted in an estimated $200 million to $300 million in underpayments at Woolworths, which Ashurst advised the supermarket giant on.

However, unlike Woolworths and other major companies disclosing underpayments, Ashurst refused to reveal the total back pay bill, the number of staff affected, average individual underpayment amounts, or what period the review covered.

A spokeswoman for Ashurst sought to distance the firm's underpayments from its advice to clients on the issue.


“Our employment practice is the leading practice in the market, but it is not responsible for administration of the firm's payroll processes,” she said.

The Australian Financial Review understands some of the individual back payments, paid out over the past few months, span between $10,000 and $15,000 over a nine- to 12-month period.

The largest backpay involved staff working on the Hayne royal commission, where legal teams representing the banks reportedly worked 16-18 hours days, seven days a week.

Ashurst is understood to be reviewing pay for current and former staff over the past decade, beyond the six-year statute of limitations for underpayments but in line with its advice to clients reviewing their payroll.

The review, independently verified by Deloitte, reconciled pay with all hours worked and not just billable hours, which are often significantly less than an employee's overall workload.

'People can't believe this'

Australian Services Union national assistant secretary Linda White said members in the industry were contacting the union in disbelief and disappointment.

"People can't believe this has been done to them ... that they've been exploited," she said.


"They're hurt by the fact that the work and the loyalty they give and the effort they put in is rewarded by lawyers not complying with the law."

She said lawyers were working 60 hours a week but that firms had their "heads in the sand" over the issue.

"We think it's wider than this. We think it'll be in every law firm that employed people and they don't understand what's coming."

Ashurst was one of 20 law firms that opposed new award clauses which, from March, will require firms to record hours and conduct annual pay reconciliations to ensure salaries cover penalty rates and overtime pay once actual hours worked are considered.

The clauses threatens to shake up the legal industry as well as more than a dozen other award-covered sectors, including the financial and banking sector, the resources industry, administrative jobs and the hospitality sector.

Herbert Smith Freehills executive partner Andrew Pike welcomed the increased scrutiny on underpayments. Janie Barrett

The law firms told the Fair Work Commission last year that the proposed requirements imposed an unreasonable "administrative burden" and clashed with the industry's "highly sophisticated working environment in which staff worked in a highly autonomous manner".

However, at least eight of those firms, including King & Wood Mallesons, Allen & Overy, Clayton Utz, Piper Alderman, Lander & Rogers, Herbert Smith Freehills and Gilbert + Tobin, are now conducting underpayment audits.


King & Wood Mallesons chief executive partner Berkeley Cox said his firm's review was ongoing, but that it had not yet identified any underpayments.

The firm faced a WorkSafe investigation in 2018 for overworking lawyers and staff to meet punishing Hayne royal commission deadlines, with one source telling the Financial Review that some staff were choosing to sleep at the firm's Melbourne office to get through the workload.

Increased scrutiny

Herbert Smith Freehills executive partner Andrew Pike welcomed the increased scrutiny on underpayments and said his firm's review, now complete, had not uncovered any issues.

“This issue of employee remuneration has been getting greater attention in the community in recent months and rightly so,” he said.

Allens and Minter Ellison, which round out the big six, were the only firms to refuse to comment on whether they were conducting audits.

The Ashurst underpayments are surprising given that top-tier firms start graduates on about $80,000 a year – almost 60 per cent more than the award minimum of $51,000.


By contrast, mid-tiers generally pay grads $60,000 to $65,000 and are far more vulnerable to underpayments.

Despite this, mid-tier DLA Piper is understood to not be reviewing the issue on the basis that the likelihood of any problems is low.

A Piper Alderman spokeswoman said the firm paid above the award and "to date we have found no instances of non-compliance".

Lander & Rogers chief executive partner Genevieve Collins said she was "confident" there had been no underpayment of graduates but was "nevertheless in the process of conducting a full audit of this".

Lander & Rogers chief executive partner Genevieve Collins said she was "confident" there had been no underpayment of graduates. Erin Jonasson

"If there has been any underpayment, which we doubt, we will backpay immediately.”

Gilbert + Tobin, which has faced two SafeWork investigations in the past year over complaints of workplace fatigue and hours, is also in the midst of a review of graduate hour and pay, looking back six years.

The firm previously faced underpayment issues in 2016, when it back paid paralegals for unpaid overtime entitlements. The firm has closely tracked the hours and pay entitlements of paralegals since then.


Baker McKenzie, Gadens and Hall & Wilcox did not respond to a request for comment.

Maddocks and Norton Rose Fulbright have existing processes for ensuring pay and hours are reconciled.

K &L Gates human resources director Nick Grant, who led the group of 20 in the Fair Work Commission, did not comment on whether his firm was conducting a review.

"We remain alert to our employment law obligations and we are confident that we meet those obligations," he said.

hannah.wootton@afr.com | david.marin-guzman@afr.com