Partners as Employees

October 23rd, 2007 by

The law firm Sidley Austin has agreed to pay $27.5 million to end an age discrimination suit involving 32 former partners. All were demoted from partner to counsel status back in 1999. Most were in their 50s and 60s. The EEOC says that the former partners, having no control over this management decision, were employees. Sidley begs to differ, but has agreed to pay anyway. Sidley is humongous: with over 1,700 lawyers across the world, only a small percentage of the workforce was involved in this particular lawsuit.
In the rarified world of corporate law, partners are co-equals. They are generally not considered to be employees. But ultimate decision-making at Sidley was in the hands of an unelected executive committee. That committee decided on the demotions and in doing so, created at least for a moment in time a new class of employees.
Even in writing the hefty check, Sidley concedes very little. “The Firm [I love the capital “F”!] believes that settling this case is preferable to the costs and uncertainties of continued litigation.” Sidley agreed that the affected partners were employees subject to the ADEAfor the purposes of resolution of this matter.” That is as stingy a concession as you will ever see, but then again, these are attorneys. On the other hand, the size of the settlement speaks for itself (in a language most attorneys understand very well.)
Sidley’s unsuccessful defense was based upon their contention that the demotions were the result of performance. That kind of slur might work against the average working stiff, but not for high powered attorneys. Indeed, the prospect of the EEOC rummaging through performance documentation did not just freak out Sidley management; some of the impacted former partners objected as well.
The settlement will result in payments ranging from $122,169 to $1.84 millon. Chump change, perhaps, in the world of corporate law. Even the smallest of these payments looks huge in the world of workers comp, where a lifetime of pain and disability often translates into a few thousand dollars.
Who Rules?
The core issue here involves management authority. The demoted Sidley partners simply lacked the key powers of partnership. They rarely met as a group (it would require a convention center) and they never had the opportunity to vote on major issues. Though powerful and autonomous in much of their work, the demoted partners were powerless when it came to determining their own status in the Firm.
The issue of partner versus employee is still very ambiguous. This hefty settlement has undoubtedly sent hundreds of law firms across the country scurrying to review their governing procedures. There is one thing they will not lack as they parse out the rights and responsibilities of partnership: access to counsel.