October 29th, 2009 by Jim Cotterman
Whatever happened to mandatory retirement? Just two years ago in 2007 the New York State Bar Association (NYSBA) and the American Bar Association (ABA) developed position statements urging abandonment of mandatory retirement. According to the NYSBA report, “We do not suggest that partnership is, or should be, a guarantee of life tenure, and we are well aware of the economics of law firm practice and the need for senior partners to pass on client responsibilities to younger partners.” Then the ABA recommended that law firms evaluate their older partners on the basis of individual performance. “The time has come for law firms to put mandatory age-based retirement policies out to pasture.”
In September 2007 Altman Weil’s Flash Survey on Lawyer Retirement, a survey of managing partners in law firms with more than 50 lawyers, found that while 50% of those responding had mandatory retirement provisions only 38% agreed with enforcing such policies.
Following closely in October 2007 on a separate but related issue was the EEOC v. Sidley Austin LLP age discrimination case. Here a federal judge approved a $27.5 million consent decree with the EEOC involving partners allegedly forced from the partnership because of age.
Several firms have since announced that they support ending mandatory retirement. And we expected that the stage was set for a great many more firms to begin a dialogue about how to handle senior partners in a manner that complied with best practices and served the needs of the firm, clients and individual partners. Unfortunately along came the credit crisis and great recession. Many important leadership issues had to be set aside temporarily. But now as we sense that we have found economic bottom (absent some destabilizing event), it may be very appropriate to re-engage on these issues.
The clock does not stop for recessions and the economic tsunami that has swept the globe has ravaged personal financial and real estate assets — the foundations of our retirements. The profession and society continue aging. And although the recent improvement in asset values is certainly welcome there remains a long road ahead. Many partners are going to want to continue the practice of law well beyond the years typically associated with mandatory retirement. Many will still hold solid relationships with key clients, be prominent in their communities and still enjoy advising and representing clients.
It is our view that the EEOC clearly signaled its desire to extend employment protections to self-employed partners under certain facts and circumstances. We do not believe that is likely to change. We think that mandatory retirement will be replaced with more actively managed programs that involve transitions from leadership, management, ownership and eventually the practice of law. We suspect that there will be career oriented performance and quality standards put into effect along with a rigorous evaluation process for partners. Compensation and return of capital arrangements will provide a means for varying transition programs, even within a single firm. There may even be a return to deferred compensation arrangements, but these will almost certainly be self-funding and selectively available.