Is a Large Law Firm a Partnership or an Employer?

Despite being called partnerships (or LLP’s or PC’s), the governance of large law firms has fallen to a very few in the organization (“the management committee”). And, the remaining “partners” have begun to look like, act like and think like employees, not owners.

The headline in the January 18th Los Angeles Times is: “U.S. Charges Law Partnership With Age Bias” … In a class-action suit, the EEOC says one of the nation’s oldest and largest (Sidley Austin Brown & Wood, based in Chicago, IL) law firms broke the age discrimination law by forcing out 32 older lawyers.

The EEOC’s class-action suit – the first of its kind against a law firm – alleges that Sidley Austin has maintained an illegal “age-based retirement policy” since at least 1978 and that the firm arbitrarily forced out 32 partners in 1999.

Sidley has 1,500 lawyers in a dozen cities, including Los Angeles, spread over three continents. It represents a number of large corporations, including Tribune Co., the parent company of the Los Angeles Times.

Historically, law firm partnerships have not been subject to discrimination laws because partners, as the co-owners of an enterprise, were considered employers. Sidley consistently has taken the position that all its partners were employers, and therefore not covered by age-discrimination law.

The EEOC alleges that the “retired”/”fired” lawyers were partners in name only because they had no voice in the firm’s management – including hiring, firing and salary decisions. Consequently, the lawyers were “employees” entitled to the protections of the Age Discrimination in Employment Act.

This is the traditional “form vs. substance” argument used by the Internal Revenue Service in tax cases. If it walks like a duck and talks like a duck, it must be a duck.” The article continues by quoting Kimberly Yuracko, who teaches employment law at Northwestern Law School in Chicago, saying that “… ultimately, the case will turn on the real way Sidley operated, not the titles the individual lawyers held.

The facts of this particular case are not so important as is the fact that large law firms are becoming … and are becoming viewed as … what they are: employers.

Categorized in: Management