Watch your back when guarding the partnership

Legalweek.com
05 May 2011
By Gareth Brahams

In the supposedly genteel atmosphere of City law firms, small gesticulations can signify life changing events. If Bill, Jill and Phil are senior associates in the corporate department but there is only room for one partner, they will all have been making huge personal sacrifices with the £1m+ profits per equity partner reward in sight. If Bill gets the nod for partnership, the others (certainly Phil and maybe Jill) will be expecting a chat along the lines of 'we think it is time to take your career in a different direction...' (ie, to a different place, preferably an in-house role, from where you can send us all the work that you outsource even though we are firing you). If the associate does not get the hint, the tapping comes more frequently, and more like a push towards the door. Eventually, a dismissal will happen. Jill may manage to escape in the short term, perhaps by being offered a professional support lawyer (PSL) role or something on the alternative track to partnership, like an of counsel role.

Many law firms and other professional services firms practise this 'up or out' model, some more openly than others - but is it lawful? It certainly does not immediately resemble any of the potentially fair reasons for dismissal recognised by law. It is sometimes dressed up as capability - but truthfully, that does not capture it. There is no issue with the associate's performance as an associate, they have just lost out to a better candidate in the tournament to make partner. Most law firms can live with the unfairness, though, because compensation for it is capped at around £70,000 and most associates can be persuaded to take less in order to avoid the stress, cost and career-defining humiliation of a battle in tribunal.

The bigger question may be whether this is age discrimination (for which compensation is unlimited). It seems inarguable that the policy has a particularly acute effect on associates in their mid to early thirties. Legally, that makes the question: is this the only sensible way to achieve the law firm's aims? What is it aiming to do? Maintain a pyramid structure? Ensure that the firm is stocked with high-quality people? Get rid of expensive overhead? While superficially this makes sense, how does that justify dismissing a 10-year qualified associate who is perfectly happy to earn the same money as he did five years previously? He is not standing in the way of a pyramid structure and is happy to report to a partner for the rest of his life. He is not more expensive than a five-year qualified lawyer. He can do the job at least as well as a five-year qualified associate identified for the partnership track. It does not stack up. If that is right, then it is unlawful. And, more to the point, what is this really about? Perhaps that the firm wants to be comprised of younger people, who are stereotypically perceived as more malleable, more energetic, more social and driven to work harder?

There are arguments the other way, the best of which may be that it is only the tournament for the prize of equity that drives performance - once an associate has been told that they will not win the race, they stop running as hard. This is no slam dunk defence for the up or out law firm, but as yet no associate has gone all the way to the tribunal to test this argument. It would be a brave lawyer who took a risk with his reputation by running the case and litigation is, as we are always advising our clients, unpredictable.

But here's a thought. Funny, isn't it, that Jill got offered the PSL job while Phil got shown the door. If Phil had been called Philippa, might it have been different? Watch out for sex discrimination cases, too. There's still something in the law for the 'stale pale male'.