Quite some time ago many law firms became what is often referred to as “two tier” partnerships. The origins began when enormous growth in the legal industry forced firms to make large numbers of “worker bee” attorneys partners at firms. It was the only way to hold onto senior lawyers who were actively servicing clients and maintaining the client relationships for rainmakers.
But despite the need to hold onto the talent, rainmaking was still the activity which offered the brass ring. Thus, firms struggled with too many mouths opening to eat from the same profit pie. Born from this was the second tier known as salaried, non-equity partner. And at some firms the tier was broken down even further in terms of those who had a vote in firm management, and those who did not.
Recently, the EEOC focused its sights on a firm with this type of structure: Chicago-based Sidley Austin. The EEOC claims the firm, which now has some 1,600 lawyers, discriminated against more than 30 of its own partners. The alleged discrimination occurred in 1999, before Sidley & Austin, as the firm then was known, merged with New York City-based Brown & Wood in 2001.
In a devastating blow for the firm, the 7th U.S. Circuit Court of Appeals last week gave the EEOC a green light to proceed with its class action case against the firm. This one promises to go all the way to trial, and if it is decided in the government’s favor, the Sidley case will adversely affect law firms, accounting firms and other partnerships. The bad news is that it could attack the very basis for how professional firms do business and how they set themselves up. The good news is that it could create a goldmine for plaintiffs lawyers across the country to sue on behalf of people who are called partners but are really employees, and to do so under the civil rights laws.
The alleged discriminatory behavior is that which is practiced routinely at firms across the nation. Admittedly mostly at large firms, but not exclusively. The EEOC suit contends the Sidley partners at issue were partners in name only. Since they were treated as employees, the EEOC argues, the partners are protected against their downgrade to special counsel status in 1999 under the Age Discrimination in Employment Act. EEOC is also suing on behalf of an unknown number of additional partners who have been forced to retire from the firm under an age-based retirement policy since 1978, in violation of the ADEA.
In a post regarding ADA issues entitled “What is a ‘Reasonable Accommodation?” on November 4, 2005, I stated “You never want to be the employer whose case becomes a “model” for the EEOC! This suit is another “model” or “test” case, which the EEOC is hoping will allow it to effectively break new legal ground.
Because of the potential damages — millions in back, front pay, interest and possible double damages for a willful violation — this is not a case which law firms can ignore. Take a look at your own partnership structure. If you have partners who are partners in name only, e.g. are actually treated like salaried employees with some extra fringe benefits, make sure that you are not employing discriminatory practices. Partners ordinarily are not protected by anti-discrimination laws because they are not employees. But the EEOC suit contends the Sidley partners at issue were partners in name only.
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