Law firm to pay $27.5 million to end age-discrimination case
One of the nation’s largest law firms has agreed to pay $27.5 million to 32 former partners to settle a ground-breaking age discrimination case, the Equal Employment Opportunity Commission announced Friday.
The EEOC brought the case against Chicago-based Sidley Austin, which has more than 1,700 lawyers in 16 cities, including Los Angeles, after it downgraded the attorneys’ status in 1999 and told them they would have to leave the firm.
The case had been closely watched because of a widely held belief in the legal profession that firm partners are “employers” and therefore not covered by federal anti-discrimination laws.
The EEOC contended in a 2005 lawsuit that the cashiered 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 protection under the Age Discrimination in Employment Act, the suit contended.
The firm vigorously defended the case but lost key preliminary rounds in U.S. District Court in Chicago and at the U.S. 7th Circuit Court of Appeals. The Supreme Court declined to review the decisions. The firm decided to settle by agreeing to a consent decree, without admitting wrongdoing.
However, in the agreement between the EEOC and the firm approved by U.S. District Judge James B. Zagel in Chicago on Thursday, Sidley Austin made a significant concession, agreeing “that each person for whom the EEOC has sought relief in this matter was an employee within the meaning of” the Age Discrimination in Employment Act. The decree also bars the firm from firing or retiring a partner because of age, and from setting a mandatory retirement age for partners.
John Hendrickson, the EEOC’s regional attorney in Chicago, said he thought the case set an important benchmark.
“Up to now, with no particularly good reason that I can discern, people in control of law firms said that if they called someone a partner . . . they didn’t need to worry about federal employment discrimination laws,” he said.
He said the case ensured “the protection of professionals from discriminatory employment actions” and ratified the authority of the EEOC “to investigate and obtain relief for victims of age discrimination on its own initiative.”
Duke University law professor Catherine Fisk said the resolution made sense.
“Anyone who is in a position where they can be forced out because of age should be considered an employee,” said Fisk, an employment law specialist.
New York University law professor Stephen Gillers said the settlement is “a confirmation” of major changes in the legal profession in the last 25 years.
“We have seen the creeping bureaucratization of large law firms,” he said. “Slowly but surely, they act less like organizations of professionals and more like traditional businesses with a product to sell. This case is a further confirmation of that metamorphosis.”
Ronald S. Cooper, the EEOC’s general counsel in Washington, emphasized the broader ramifications of the settlement.
“The demographic changes in America assure that we will see more opportunities for age discrimination to occur. Therefore it is increasingly important that all employers understand the impact of the Age Discrimination in Employment Act on their operations and that we reemphasize its important protection for older workers,” he said.
The amount to be paid to each of the 32 former Sidley lawyers was placed under seal. However, the EEOC said that the payments ranged from a low of $122,169 to a high of $1,835,510, with an average payment of $859,375.
The EEOC began an investigation of Sidley in 2001 after major changes at the firm. According to the suit, Sidley for many years had a mandatory retirement age of 65. But in 1999, 32 lawyers over age 40 were told that their status was being downgraded from partner to “special counsel” or “counsel,” and that their pay would be reduced by about 10%. They also were told that they soon would have to leave the firm.
At the time, Sidley was run by a management committee of eight to 10 lawyers and an executive committee of 36, according to court records. Hendrickson said those committees were “self-perpetuating,” meaning the rest of the lawyers in the firm had no voice in major decisions -- including who made partner and how profits were divided.
David A. Richards, one of the 32 lawyers on whose behalf the EEOC sued, said he thought the firm had taken the action, at least in part, to increase profits for the remaining partners. Richards, who was 54 when he was told of his status change, said that managing partners made “absolutely” no contention at the time that his performance was a problem.
A year or so later, Richards landed a job with McCarter & English, a large New York firm, where he still works as a real estate lawyer.
On Friday, Richards said, “The settlement was overdue, but it gives all involved a satisfactory conclusion.”
The lawyers who sued now “have confirmation that their discharge was not for the quality of their work,” he said.
The commission, Richards emphasized, “has established an important legal principle for all large professional partnerships.”
Sidley, through a New York public relations firm, issued a statement saying that it “believes that settling this case is preferable to the costs and uncertainties of continued litigation.”
“This settlement puts the cost, time and distraction of this litigation behind us. Moreover, continuing litigation with the EEOC would have placed us in an adversarial position with former partners.”
The firm said it continued to employ some of the lawyers who were stripped of their partnerships, but did not say how many.
Sidley Austin has represented a number of large corporations, including Tribune Co., the parent company of the Los Angeles Times.
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