In-house lawyers are 'failing' on both redundancy and software compliance

KNOW-HOW: Software federation and City firm show weak points in companies' internal advice

In-house lawyers were hit by a double attack this week after they were accused of not ensuring software is compliant when businesses merge and having an alarming lack of knowledge of redundancy procedures.

The Federation Against Software Theft (FAST) has warned that following the Enron scandal and increasing merger and acquisition activity in Europe, it is time for companies to pay greater attention to the issue of software compliance and ownership.

Paul Brennan, FAST's legal counsel, said: 'When firms develop and merge, they end up using software applications they are not licensed for.

Company directors and partners are personally liable for software infringements during merger activity, especially if they turn a blind eye to a potential problem.'

He continued: 'In-house lawyers should be advising their companies to draw up and enforce a software compliance policy including a software audit.

They will know of the legal risks of copyright infringement but may not have an adequate grasp of the technical issues faced by the IT manager in order to assess the risk.

'To properly assess the risk is one thing, to stick your head in the sand and hope for the best is another.'

Mr Brennan said FAST had already dealt with six cases this year, normally as a result of 'an insider whistle-blowing on the company'.

Meanwhile, a survey of in-house lawyers at 86 FTSE 500 companies, carried out by City firm Taylor Joynson Garrett, found that 40% were unaware of the 20-person threshold for notifying the Department of Trade and Industry (DTI) of redundancies, while 20% admitted to involvement in a 'sham' pre-determined selection procedure for redundancy.

Despite such failings, only 3% of those surveyed said they would consider taking external legal advice.

Jonathan Croucher, an employment partner at Taylor Joynson Garrett, said: 'Despite findings indicating that companies have carried out redundancies and therefore have more experience in this area, many still show a worrying lack of awareness of the legal requirements of the process.

'The survey indicates that employers may be missing simple opportunities to reduce their exposure to employment tribunal claims and the benefits of taking legal advice from an outside party at an early stage cannot be underestimated.'

Ann Page, chairwoman of the Law Society's Commerce and Industry Group and Co-operative Bank's head of legal, said: 'We are not aware that in-house lawyers aren't up to speed on matters of software compliance and redundancy procedures.

We do a lot of training on human resource matters and receive good feedback.'

Ms Page said that in relation to the redundancy survey, it is important to look at the structure of the human resources department and whether there is close contact with in-house lawyers before apportioning blame.

Andrew Towler