The Law School Magazine  ·  Spring 2008 : Features

Weighing the Options: Firms Likely to Consider Whether Mandatory Retirement Policies Are Worth Keeping

By - Spring 2008
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Picture this.

You’re turning 65 in a few months, and two of your firm’s managing partners call you into a conference room.

You know what’s coming. To be truthful, you’ve been thinking about it for months – wait – years.  You’ve spent the last 35 years working long hours, ensuring that you were carrying just as much weight as your fellow partners. You’ve sweated through late nights and weekends in the office to keep the firm doing better than it did the year before.

But, now, the same firm is waving goodbye.  It’s telling you “thanks,” “so-long,” “hasta la vista.”

It’s no fault of the two younger, slightly nervous managing partners – who, by the way, you helped hire and promote.

That’s the firm’s rule.  It’s retirement at 65 and nothing else.  It’s mandatory retirement. “It’s not that you’re not valuable, it’s just how it is,” you’re told.  “You know if we could, we’d keep you on forever.”

But they can’t do that, for the same reason you had to let colleagues go when you were in their shoes years ago.  When you said goodbye to those partners, though, 65 was a normal retirement age.  You’re not 65; you’re only 65.  The heck if someone should force you out of the job you’ve loved for so long.

Similar conversations continue to unfold in law firm offices from San Francisco to New York, Columbus to Orlando.  With a recent landmark settlement involving a law firm and its mandatory retirement policy, and the American Bar Association and New York Bar Association calling for the eradication of such policies, the topic will likely soon appear on a partner meeting agenda near you.  Major U.S. firms across the country are dropping their mandatory retirement systems in exchange for what they hope are more reasonable and fair alternatives.

Partners are charged with creating the best-working, least-offensive, and most unlikely-to-get-sued-for policy possible.  It’s no walk in the park.

On one side, baby boomers – the 78 million Americans born between 1946 and 1964 – comprise a larger-than-normal group of aging attorneys who are well-connected and well-respected in their legal areas.  The same attorneys – thanks to factors such as inflation, education costs, and longer life spans – will probably retire later than their parents did.  These realities of demographics and job performance, combined with the greater possibility of being sued for age discrimination, are encouraging some law firms to reconsider their mandatory retirement policies.

On the other hand, mandatory retirement certainly has its benefits.  It’s a simple and uniform way of handling what are often uncomfortable situations.  Everyone is treated equally, and there’s less chance of hurting someone’s feelings.  And perhaps most important, such policies accelerate a necessary transition of partner relations to a new, younger group of lawyers.

“Any changes are not going to be made easily,” said Ohio State Law Professor James Brudney, who is an expert in labor and employment law.  Brudney is the former chief counsel and staff director of the U.S. Senate Labor Subcommittee of the Labor and Human Resources Committee, and he helped draft the 1990 Older Workers Benefit Protection Act.  “At the same time, law firms should recognize that this issue will not disappear anytime soon.”

Sidley Case Brings Issue to Forefront

In 2005, the Equal Employment Opportunity Commission (EEOC) filed a complaint against the 1,800-attorney firm Sidley Austin LLP.  The EEOC alleged that Sidley Austin forced 32 partners to surrender their equity status in the firm’s partnership because of their age.

The case eventually centered, in part, on whether the 32 lawyers involved were true “partners” in the firm or were actually employees, and therefore covered by the federal Age Discrimination in Employment Act (ADEA).  In October, a federal judge in the Northern District of Illinois approved a consent decree that included Sidley Austin paying out $27.5 million to the former partners.  Since the case settled it wasn’t dispositive, but it did raise the question of whether mandatory retirement policies at law firms are exempt from age discrimination laws.

The case, as Brudney and a handful of Ohio State Law alumni contacted for this story observed, may be fact-specific.  The EEOC argued Sidley wasn’t run like a true partnership and, as a result, the rank and file partners are employees, at least as far as the ADEA is concerned.

Of the firms that responded to a 2005 American Bar Association survey, 37 percent had mandatory retirement policies.  Of the firms with more than 100 lawyers, 57 percent had mandatory retirement policies, while only 13 percent with fewer than 10 lawyers had them.

In 2006, the New York Bar Association formed a special committee on “gray” lawyers to study mandatory retirement policies.  The committee recommended that firms eliminate their policies, stating: “A blanket policy of mandatory retirement of law partners is, at best, shortsighted. It short changes not only the individual lawyer but the firm and society as a whole.”  In 2007, the American Bar Association – based on the report by the New York Bar – adopted its own similar recommendation.

Some large law firms across the country have begun to listen to the recommendations.  Media reports show that large firms like Kirkpatrick & Lockhart Preston Gates Ellis, Dewey & LeBoeuf, and Cadwalader Wickersham & Taft have pledged to end their mandatory retirement policies following the statements of the two bar associations.

Learning From Others

Of the Ohio State Law alumni contacted, each had some sort of mandatory retirement provision written into their firm’s partnership agreements.

“We are carefully monitoring these developments,” said Alec Wightman ’75, who is one of the executive partners of Baker Hostetler in Columbus.  The firm’s human resources duties fall in Wightman’s lap, and therefore he said he’s been watching the issue evolve.  “We’re waiting to see how the world reacts first.  But I am accumulating information on this topic, and I’m sure we will carefully look at the issue and discuss how we should handle it.”

At Baker, Wightman said, partners are forced to give up their equity partner positions the Jan. 1 following their 64th birthday, but there are still opportunities for lawyers to work beyond that point.  If partners wish to continue working, they can apply to the firm’s Policy Committee which will vote whether to retain the former partner as a “senior partner” for another two or three years, Wightman said.  After that, attorneys may continue to work on a contract basis.

Proponents of mandatory retirement plans argue that if such policies were eliminated, it would make it more difficult for associates to become partners, and, once they do, they may be among a larger (and growing) number of partners.

However, Wightman said any changes to his firm’s mandatory retirement policy would focus more on a healthy transition of clients than the economics of a change.

“Whether a lawyer is in the equity partnership or not, if he or she is working there are still dollars going somewhere reflective of the contribution,” he said.  “I don’t think I would start the analysis with the size of the pie, or the size of the slices.  My guess is, if we talked with people who drafted the partnership agreement years ago, they would say that the policy encourages the transition of client relationships.  I think that it is those types of considerations that need to be weighed against other arguments.”

Marty Glick ’64, a director of the San Francisco-based firm of Howard Rice Nemerovski Canady Falk & Rabkin, said that a few attorneys have stayed on after the company’s mandatory retirement age of 70.

“What age is fairly arbitrary,” Glick said.  “I suppose it gives the firm an easy opportunity to tell someone who is coasting and doesn’t really want to retire at that point that it’s time to find something else to do.”

But, Glick said, that sort of conversation can happen at any point in an attorney’s career.  If someone is not carrying their fair share, that person could always be asked to leave “at 70 or at 30,” he said.

“Nothing is vested in the modern law firm,” he said.  “You make a commitment to the firm, and the firm makes a commitment to you.  But it is not like being a tenured law professor – which I can say because I was a law professor.  That’s a much deeper commitment.  At a law firm, it is still an ongoing business partnership and its partners need to produce or they will be asked to leave.”

At the firm of Porter Wright Morris & Arthur, the mandatory retirement age was recently changed from 73 years old to 68 years old, according to Charlie Warner ’70, who is a partner in the firm’s Columbus office.  “But if someone really wants to continue working they can continue to do so as of counsel,” Warner said, adding that such arrangements include special compensation packages.

Warner said that as some firms continue with their mandatory retirement plans, the growing use of the more portable 401k retirement plans, rather than defined benefit pension plans may contribute to older attorneys switching firms late in life.

“People will probably start to say ‘if I’m being forced out here and can’t get the full value of my practice, I’ll simply leave and move on to somewhere that I can,’” he said.  “That’s not something that you could do with a defined benefit plan.”

No perfect solution

Professor Brudney said that the best answer is probably a case-by-case, individual evaluation of lawyers as they approach retirement.  Attorneys would sit down with their fellow partners and explain their expectations and plans as retirement nears.  Partners would then be charged with deciding how to combine an older colleague’s desire to continue working with the needs of the firm, or ask a partner to retire.

“Mandatory retirement policies—like bright line rules generally—are easier to administer,” he said.  “If you don’t have to make individual decisions, you avoid the time investment of conducting in-depth assessments and the psychological pain of letting people know they are not needed anymore. But why get rid of all that talent—lawyers whose experience, savvy, and diplomatic strengths are assets to the firm and many of its clients?  It shouldn’t happen just because you want to avoid offending some people.”

Brudney admits that a more individualized program would take time to implement, and it certainly isn’t perfect.  Whenever such case-by-case decisions are made, a firm could open itself up to various forms of discrimination litigation.

“It’s not just whose feelings are going to be hurt,” Brudney said, “it’s who is going to want to sue. Of course, forcing all partners out at 65 or 70 may also trigger litigation given recent developments in this area.”

Race or gender discrimination might also be claims made in lawsuits filed because one partner was asked to continue working while another was forced to retire.  But Brudney noted that factors like race and gender are not likely to be implicated in late-career terminations, and in any event these factors continue to appear – at least in the public’s eye – as more discriminatory than age.

“It’s not as obvious to people that an individual ‘forced’ to leave a firm because of advanced age is really being discriminated against,” he said.  “But I think this generation will be more sensitive to such decisions, given their expectation of remaining healthy and professionally productive for a longer period.  I doubt that mandatory retirement policies at law firms will remain as widespread as they have been in the past.”

 

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