Tuesday, October 16, 2007

Discriminating Lawyers

Usually lawyers are the ones fighting battles over discrimination rather than being the subject of them. But two recent age discrimination cases make an interesting comparison--one in the US and the other in the UK, and both in large law firms.

Peter Bloxham, a former partner of Freshfields, was caught in the law firm's restructuring trap. The firm has been going through major changes to increase its profitability over the last few years. One was to reduce the number of partners by 100. The other entailed revising the firm's pension plan.

The partner reductions have occurred. This was the infamous "Size & Shape" programme.

The pension changes have been made too. Essentially, Freshfields paid pensions out of current earnings, with a cap. As the firm has grown this has become unsustainable, the firm has claimed. Imposing an arbitrary cutoff point of 55 years, those below would take a big hit (20%) on their future pensions. At 54 years old, Bloxham objected.

Testing out the new age discrimination law, Bloxham claimed he was, in effect, "constructively retired" from the firm. He sued, and others are in the queue.

The Industrial Tribunal decided he would lose this claim saying that the firm's actions were proportionate in achieving its proposed pension reform. It seemed to suggest as partner he had freedom to choose. Bloxham had said he wasn't treated fairly as other partners were offered better terms.

In Chicago Sidley Austin agreed to settle its discrimination suit by 32 former partners (reduced to of counsel by the firm in 1999) for $27.5 million. The EEOC had won an appeal court ruling stating that the parners were actually employees because of the law firm's closed management style. Sidley didn't want to risk going to trial.

Some believe that the Freshfields decision was the correct one--"a victory for common sense". And in a way it is. As is Judge Posner's ruling in Sidley. Because the fundamental mistake that Peter Bloxham made was to think he actually was a partner in a law firm. On paper yes, but in reality he was an employee just like those Sidley lawyers. Our courts have not got round to stating it quite so baldly. But it will happen.

There is a fiction that partners in professional service firms are autonomous, independent beings who are severally and jointly liable. That may be what partnership law says, but if a partner were to act autonomously he or she would soon be asked to leave. And that would not mean dissolving the partnership. It would be a straight firing, but discreet.

In the Financial Times (Monday 15 Oct) KPMG announced that it had made up 810 new partners globally. Yet if you look at KPMG's website you will see its proud boast of 113,000 professionals on staff led by global leaders on the board. At this point it's obvious that the term partner is being used in the loosest of ways. It really means someone who is now paid more than the others with the kudos of being labelled partner without any concomitant power.

Large law firms are the same. Partner equals impotence. The era of professionalism is dead; the era of being a member of a partnership has disappeared. A partner is another stratum in the geology of corporate organizations.

Partnership is no longer morphology--it's pathology.

There is, however, nothing wrong with this as institutions evolve, mutate according to environmental and internal pressures. Professional service firms, so called, are no different to any other kind of corporate enterprise. But rather than attempt to maintain fictions derived from 19th mores, it would be preferable if law firms and other professional service firms just told the truth about what they really are. Then we could hold them to account for full transparency and they could no longer hide behind the "professional" veil.

This is why Peter Bloxham was doomed to fail in his case. (And I haven't addressed the age concerns.) He thought he was a partner in a law firm, a professional man. Sorry Peter, the dream is over.
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