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Kelley Drye Pressured to Eliminate Mandatory Retirement Policy

By Elenore Cotter Klingler, Litigation News Associate Editor – April 15, 2010

Editor’s Note: This article was originally published on March 25, 2010, and has been updated to reflect recent developments.

Kelley, Drye & Warren, LLP, the law firm facing suit by the EEOC for its partner de-equitization policy, is back in the news. Within only days of filing its answer [PDF] in the EEOC case, the firm has announced that it is eliminating its mandatory retirement policy altogether. According to the New York Law Journal, the firm has amended its partnership agreement to allow partners to continue on past the former retirement age of 70, with their performance evaluated like younger partners.’

Case Allegations
In its complaint, the EEOC alleges that Kelley Drye partner Eugene D’Ablemont was forced to give up his equity in the firm after he turned 70 and forced to accept instead an annual bonus set by the firm’s management committee. After D’Ablemont brought a discrimination charge, the EEOC claims that his bonus was reduced by two-thirds in retaliation for his complaint.

Kelley Drye denies the EEOC's allegations in its answer and asserts that partners such as D'Ablemont are employers, and thus not subject to the Age Discrimination in Employment Act. Kelley Drye also directly attacks D’Ablemont, claiming that he “has a history of objectionable behavior inconsistent with the expectations for a Kelley Drye Partner” [PDF, Answer, at p.6–7].

At press time, the firm had not commented on whether litigation would continue with the EEOC, given the change in the retirement policy.

Making the Transition
The question of how to transition older attorneys to a less active role within a firm is not a new one. According to a 2005 Altman & Weil survey for the National Law Journal [subscription required], 37 percent of law firms nationally and 57 percent of law firms of more than 100 lawyers have mandatory retirement policies.

The issue gained national attention among lawyers in 2002, when the Seventh Circuit Court of Appeals issued an opinion in EEOC v. Sidley Austin Brown & Wood . In that case, the EEOC subpoenaed records from Sidley Austin in support of an investigation into its de-equitization policy. The firm objected to the subpoena, claiming that as a partnership, it was exempt from the Age Discrimination in Employment Act.

The court did not directly decide the issue, but its opinion strongly questioned whether individual partners at Sidley Austin were truly “employers,” given that they had virtually no control over the management of the firm. The case was settled in 2007 for $27.5 million.

The declining state of the economy may well be keeping some partners who had intended to retire at their desks. Although she would not comment on the Kelley Drye case, Elizabeth Grossman, New York, a regional attorney for the EEOC, notes that “modern medical advances in combination with changes in the economy are making people interested in working longer.”

The issue of retirement is “a quandary for law firms,” says P. Arley Harrel, Seattle, cochair of the ABA Section of Litigation’s Employment and Labor Relations Law Committee. Under current law, full partners who qualify as “employers” can be terminated without involving the Age Discrimination in Employment Act, but when firms try to slowly transition older partners to retirement, partners “can start looking like employees,” Harrel says.

Harrel recommends instead that firms look at partners on a case-by-case basis. “How does your productivity look?” he asks.

The issue is not limited to the largest law firms, notes Harrel. Any time a firm moves away from the iconic image of law firms, where a handful of partners share the profits and make consensus decisions, the question of who is an employer can arise.

Some firms may decide to follow the lead of K&L Gates, which formally abandoned its mandatory retirement policy in 2007.

“Employers are seeing that mandatory retirement policies are not in their own interest,” observes Grossman.

ABA Opposes Mandatory Retirement
The ABA House of Delegates formally adopted a policy [PDF] opposing mandatory retirement in 2007. The resolution, which passed by voice vote but was not unanimous, paralleled a report [PDF] by the New York State Bar Association and recommended that firms end age-based mandatory retirement programs. Instead, the report endorsed programs that would individually evaluate partners using performance-based measures.

With the oldest baby boomers now reaching age 65 and likely to be 20 percent of the population by 2030 [PDF], it is clear that the issue of attorney retirement is not going away.

Harrel recommends that firms find a balance that benefits everyone. “They have to think what’s best for the law firm, for society, for clients, and form policies,” he says. “As long as you have your mental faculties and some clients you can work for, you’re still being useful,” Harrel opines.

Keywords: mandatory retirement policy, age discrimination, de-equitization of partners, EEOC v. Kelley Drye & Warren, LLP, EEOC v. Sidley Austin Brown & Wood

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