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Law firms clinging to their age-based retirement policies have another reason to rethink their methods for ushering out older attorneys. The closely watched case involving the legality of the retirement practices at Sidley Austin ended on Oct. 5 without a court’s decision on the merits. But the way the case was resolved and the recent calls from attorney groups for law firms to abandon their age-based retirement policies do not bode well for the mandatory plans. “This case, as well the [American Bar Association] and New York state policies are indicating a trend, even if the law doesn’t require eliminating these policies,” said Philip Berkowitz, a partner in the New York office of Nixon Peabody. He represents corporate clients in labor and employment matters. Berkowitz was referring to a report by a special committee of the New York State Bar Association (NYSBA), which concluded that mandatory retirement within law firms at an arbitrary age is not an accepted practice. The NYSBA also recently sent a letter to major law firms in New York asking them to pledge an end to mandatory retirement plans. A statement issued by the bar group said that it had received “a dozen” commitments from law firms to do so. In addition to the NYSBA efforts, the ABA House of Delegates in August passed a resolution calling for law firms to end their age-based retirement policies. A clear message Opponents of the plans were hoping for a decision from the U.S. District Court for the Northern District of Illinois that would have determined if 1,700-lawyer Sidley Austin violated the federal Age Discrimination and Employment Act (ADEA) when it demoted 32 former partners, who were in their 50s and 60s, to counsel status in 1999. The Oct. 5 settlement required Sidley Austin to pay $27.5 million to the attorneys. Despite the lack of a court decision, the settlement sends a clear message for firms to rethink their retirement policies, said James Cotterman, a consultant with Altman Weil. “It’s a shot across the bow to partnerships from the government,” he said. “It’s a statement of their intent and position.” Some 57% of law firms with more than 100 attorneys have age-based retirement policies, according to a 2005 survey by Altman Weil. The survey also found that the age of mandatory retirement is between the ages of 65 and 70, with the majority of firms requiring retirement at 70. In EEOC v. Sidley Austin, No. 05 CV 0208, the law firm asserted that the attorneys were demoted because of performance. Prior to the Oct. 5 settlement, several issues in the case went up to the 7th U.S. Circuit Court of Appeals, including whether the ADEA applied to the partnership, since the law generally covers employer-employee relationships. The court found that the ADEA would apply if the lower court determined that the attorneys functioned as employees instead of partners. In signing the consent decree, Sidley Austin agreed that the attorneys who sought relief were employees within the meaning of the ADEA. It added, however, that it entered into the agreement solely for the purposes of settlement and was not making an admission of the allegations. Even with the narrow concession that Sidley made, the settlement “should make firms gun-shy,” said Larry Richard, a consultant with Hildebrandt International. “Up until this point, there was the assumption that a partner was a partner,” he said. The key to the legality of age-based retirement policies within partnerships is the power that the partners have in the governance of the firm, Berkowitz said. As firms get bigger and add tiers within their partnerships, the divisions of power become murky, he said. At least one firm seems to be treading carefully in light of the recent developments. Asked if Holland & Knight planned to retool its mandatory retirement policy, managing partner Howell Melton issued this statement: “At Holland & Knight, we do not have a mandatory retirement policy, although our partnership agreement now requires a conversion from equity or nonequity partner to senior partner at age 70. We do have many active senior partners in their 70s and 80s and greatly value their contributions.”

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