Time's up Part-time partners Legal Business November 2004
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FULLY COMMITTED FULL-TIME EQUITY PARTNER
40 Legal Business November 2004
Photography JOHN SHORT
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FULLY COMMITTED PART-TIME EQUITY PARTNER PAID PRO RATA, THEN DOCKED 25%, THEN HALF-SPEED PROGRESS UP THE EQUITY LADDER
Time’s up Part-time partners at the UK’s top firms may be getting a raw deal. A Legal Business investigation reveals that Lovells and Freshfields Bruckhaus Deringer may be operating unfair remuneration policies that are potentially discriminatory CLAIRE SMITH
Lovells’ 24/7 headquarters, Farringdon Road, London
IN 2001, LOVELLS APPOINTED ITS first part-time partner. Today there are six, all of them women, spread across several practice areas. The firm has a female managing partner and one of the highest proportions of females in the partnership of any major City law firm. So far, so good. But that’s apparently where the equality ends. These six women are not paid anything like the pro rata equivalent of their colleagues, where pure lockstep rewards all partners on the basis of time served. If you move to four days a week at Lovells, your pay drops not only to a pro rata 80% of what it was before, but also by a further 25%. This so-called discount is used, according to Lovells sources, both as a means of discouraging partners from going part time, and because full-timers feel they must cover for part-timers when they are out of the office. What’s more, part-time partners are slowed in their progress up the lockstep. Instead of gaining three points a year, a parttime partner gains just one-and-a-half points a year, thus doubling the length of time it takes them to reach the top of equity status. At Freshfields Bruckhaus Deringer, there are three partners working part-time: two females and one male. They, too, are given their pro rata profit share, less a chunk. The reason? Head of human resources Tim Cole says: ‘There is another reduction, which is effectively to reflect the fact that the partners > on a flexible arrangement have a benefit
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> which goes beyond the reduction in hours.’ Others at the firm question the commitment of partners choosing not to work full time. Every part-time partner spoken to for this article said they consistently worked more than their agreed hours commitment. Working four days a week does not, in practice, mean working 20% less than you did before, it seems. Legal Business asked Ronnie Fox, the senior partner at Fox Williams and one of the top partnership lawyers in the City, what he thought of such a policy. He was not told the names of the firms involved. His response was that these individuals may well have a case for sexual discrimination, which comes into play because women generally dominate any class of part-time partners. ‘If the only reason [for the discount] is because you are working part time, then that is problematic,’ he says. ‘If someone is doing a pro rata share of the work and billing a pro rata share of the targets, it’s very hard to justify them not getting a pro rata share of the profit. A discount is very hard to justify.’ The argument goes that if you generally remunerate only on the basis of time served, rather than hours billed, that should remain the case for part-timers. Richard Linsell, a leading partnership lawyer at Mayer, Brown, Rowe & Maw, says: ‘I think it sounds unusual to me; it isn’t what I would expect to see. I would be interested to know whether the firm took advice on that.’
Fair compensation The top ten UK firms employ a total of 68 part-time partners between them. Out of a total population of more than 3,620 partners around the world, spot the minority. Slaughter and May stands alone as the only firm that does not have one part-time partner within its ranks; Clifford Chance has nine out of a total of 636 partners (see table, page 44). Seven of the top ten firms simply compensate their partners pro rata should they decide to go part time, and in most cases they get a good deal out of it. Shelagh McKibbin is a partner in the real estate department at Herbert Smith, and the only full equity partner at the firm who works part time. ‘If I do four days a week, I am always working at home on the fifth day. Most employers get much better value out of the arrangement because you do the work you have to do, but you squash it into the
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PART-TIME PARTNER DISCRIMINATION: THE VIEW FROM FOX WILLIAMS There is an argument that firms with compensation systems differentiating between full-time and parttime partners are open to attack on the grounds of indirect sex discrimination. Here, partnership experts Ronnie Fox and Archin Talpade of Fox Williams explain the situation: ‘Proportionately, more working women than working men have primary childcare responsibilities, so more women than men are likely to be working part time. The Sex Discrimination Act 1975 says that a person indirectly discriminates against a woman if they apply a requirement or condition such that the proportion of women who can comply is considerably smaller than the proportion of men who can comply with it. Justification is a defence to indirect discrimination. Firms can justify the discriminatory effects of a requirement or condition by demonstrating a ‘requirement for an objective balance between the discriminatory effect of the condition and the reasonable needs of the party who applies the condition’. Could a law firm show that it has reasonable needs that part-time partners go up the lockstep more slowly than a full-time partner? I doubt it.
Birtwell: part time doesn’t equal less commitment
one of the best in her field, also works four days a week. Yet despite evidence that it can be done, some part-time partners still find a huge body of opposition amongst their contemporaries. ‘There is a perception that because you are doing Compensation for sex discrimination is based on the fewer hours you are less loss arising from the act of discrimination. There is committed, and in some cases no limit to the amount which a tribunal can award. that is very deep-rooted. It’s only by showing them examples of The Part Time Workers (Prevention of Less Favourable Treatment) Regulations 2000 may also where it can work and be be relevant. These Regulations protect part-time positive for the business that you workers against less favourable treatment compared can change that,’ Jan Birtwell, a with a ‘comparable’ full-time worker. This legislation tax partner at Linklaters, says. has not been tested by a part-time partner.’ Lovells and Freshfields still need some convincing that it Ronnie Fox, Archin Talpade, merits equal pay. On the Fox Williams discount, Cole at Freshfields says: ‘It is a fairness point for the partners who are not working flexibly. It’s time available,’ she says. ‘I don’t not designed to discourage people from do less chargeable hours and I flexible working. It’s just thought to be fair don’t bill less than other that if a partner is able to prescribe their partners in the group.’ McKibcontribution, that’s a real value to those bin’s clients include BAA, House partners, whereas the concept of a five-day of Fraser and Standard Life. week for an equity partner is actually rather All over the City there are theoretical.’ Cole declined to comment when partners showing part-time asked about whether the practice might be work is possible. Just look at discriminatory. Clare Canning, Barlow Lyde & Part-time partners at Freshfields do not Gilbert’s new head of commersee their progress up the lockstep affected, cial litigation, who is profiled in and they remain entitled to all the usual the next issue of Legal Business. benefits like sabbaticals and maternity leave. She is busy defending Ernst & John Young, Lovells’ senior partner, Young against a multi-billion refused to be interviewed for this piece. In a pound claim from Equitable Life. statement, he said: ‘Lovells introduced a She works four days a week. part-time partnership scheme in 2001. A Norton Rose’s leading rail working party is currently reviewing the finance partner, Milly Ayliffe,
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operation of the scheme and is due to report later this year. All partners have been asked to contribute their views.’
No less commitment
‘If you only want to work four days a week, then you are not pulling your weight and are suggesting a breach of the partnership agreement.’ Michael Simmons, Finers Stephens Innocent
What’s fair? ‘I know somebody whose wife was fighting cancer, and so he went part time,’ says one partnership expert. ‘The idea that he has less commitment to the firm is equally offensive to saying to a woman who wants to spend time with her children that she’s not committed.’ Whether it is against the law is another matter, and the idea that any of the people affected would ever challenge their firms in the courts is pretty farcical. Lovells and Freshfields were the only two of the top firms who would not provide either the names of the partners working part time, or arrange interviews for Legal Business with the said partners. At Lovells, a spokeswoman said: ‘We have had the scheme for several years, and over that time a number of comments have been made by those who think it’s unfair to the partners on it, or to the other partners. It is quite a sensitive area, and the balance is felt by some people not to be quite right; that’s why it’s being reviewed.’ If the part-time partners don’t like it, they are very unlikely to take legal action, and should they instruct lawyers, a case would more likely be settled than ever see the light of day. They are also unlikely to leave the firm: it remains pretty hard to move laterally as a partner if you want to work part time. Similar cases do go on behind closed doors. One partnership lawyer tells of a recent case where a woman declined to be considered for partnership because she wanted to have a family. She was told by the partners in her group to go for it anyway, as there was a part-time working provision in place. She went for it, was made partner, and then when she had a child some time later she was told that the part-time partnership was only on offer once you had been a partner for a number of years. She left the firm, with compensation. In another case two senior equity partners at a professional services firm, not a law firm, asked to go part time and were told they had to give up their equity. They instructed lawyers, and got a payout. Elsewhere a female partner about to join the equity asked to go part time; she was told
that there were no part-time equity partners, and that if she wanted to go part time she would have to become a salaried partner. A couple of years later, she discovered that one of the most senior equity partners, who was male, was in fact working part time.
that indeed it is in the partner’s interest to do that, because of potential liabilities. ‘Would you have wanted to be a part-time partner at Arthur Andersen?’ he says. ‘The downside is too great.’ Four of Clifford Chance’s eight part-time partners are full equity partners; just one of DLA’s 11 part-timers is equity, as is just one of Herbert Smith’s six. Chris Saul, head of corporate at Slaughter and May, concedes that their full equity partDiscounts justified nership makes part-time partnership a more Clearly every case has to be difficult proposition. ‘We haven’t really conjudged on its own merits, and fronted it because it hasn’t there is certainly an been raised by anybody, and argument that the if it were we would consider Freshfields and Lovells the specific circumstances,’ compensation struche says. ‘It might be quite tures are perfectly legal hard for us with our pure alland justifiable. equity approach. I think intuMichael Simmons, a itively that it might not be consultant at Finers straightforward for us for that Stephens Innocent on reason. If we had a partnerpartnership law, would ship that already built into it not comment on a salaried layer, or different specific firms but says: ‘I remuneration structures for would have thought pro different contributions, it rated plus a discount is may be easier. It’s something right if you want to we would think about, but it retain equity. It’s all would be slightly anomalous contract law, there’s no Ayliffe: it comes down to the business case to fit in,’ he adds. underpinning law here. DLA employment partner Sandra Wallace, You are my partner, I expect you who is part time and salaried, says of her to work as hard as I do. You say firm’s policy: ‘I’m not sure whether if I you only want to work four wanted to be department head, or an equity days, then sorry, you are not partner, the firm would say: that’s not pulling your weight. You are something you can do on a part-time basis. I suggesting a breach of the parttend to think the higher you go, the less nership agreement and that puts likely it is that people are going to be everything up for renegotiation,’ receptive to it. But they made me a partner he says. ‘That leaves me in the knowing that was what I wanted to do, so I lurch; I am going to have to know if I made a case they would consider it.’ work eight days to compensate.’ As a separate issue he also argues that it is reasonable to Equity stakes expect partners to move out of Norton Rose, Linklaters, DLA and Herbert equity if they go part time, and Smith have all promoted people into the
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THE TOP TEN UK LAW FIRMS: ON PART-TIMERS Firm (turnover) Clifford Chance (£950m)
No of part-time partners 9
Freshfields Bruckhaus Deringer (£785m) Linklaters (£720m)
3
Allen & Overy (£652m) Lovells (£377m)
3 6
Eversheds (£296.2m)
19
DLA (£275m)
11
Slaughter and May (£245.4m) Herbert Smith (£243m)
None 6
Norton Rose (£205m)
5
15
Details
Compensation policy
Finance – Real estate – Tax, pensions, employment – Corporate – Capital markets – Litigation and dispute resolution – (Four are equity; five non-equity) Corporate – Dispute resolution – Investment management – Corporate – Projects – Litigation – Derivatives and structured products – Tax – Real estate – Plus eight outside London – Banking – Four of the firm’s five practice streams represented
A spokeswoman says: ‘The general policy is that their compensation is adjusted to reflect the proportion of time that they work. It doesn’t affect their progress up the lockstep; that still continues. They are rewarded in proportion to the time that they do.’ Pro rata, less a discount Pro rata
Human resources – Real estate – Corporate – Commercial – Legal systems – Litigation and disputes – (Six are full equity) Human resources – Real estate – Litigation – Corporate – Technology, media and communications – Insurance – (One is full equity) – Real estate – Competition – Corporate – Litigation – Corporate/energy – (One is full equity) Banking – Corporate finance – Partnership office –
Refused to comment Pro rata less 25% Lockstep progress slowed from 3 to 1.5 points a year Pro rata
Pro rata
– Pro rata
Pro rata, tailored to the individual’s business case Source: Legal Business
> partnership from part-time senior assistant roles on the basis that they would continue working part time. Milly Ayliffe at Norton Rose is one. ‘People get hung up on
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part time, and does it mean that people aren’t committed. But really, whether you get partnership or not in a City
firm is about the business case. If you are good with clients, and they are happy, then you should still get partnership,’ she says.
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‘If someone is doing a pro rata share of the work and billing a pro rata share of the targets, it’s hard to justify them not getting a pro rata share of the profit.’
work sometimes, as I’m sure she does for them when they are away.’
Flexibility works
Partners are proving that part-time working can be made to work in all areas. Some may work four days a week, others will work three weeks in four, and some take all school holidays off. It is happening in corporate departments, and in busy disputes teams. Ayliffe in Norton Rose’s finance team says: ‘I think my practice is as bad as it gets because it’s purely transactional based, and when a deal’s on it’s really on; it’s as busy as it gets. I’m working in a very high-profile sector and in one of the firm’s key areas, so if Miller Smith: clients recognise other commitments I can do it, then other people ought to be Ronnie Fox, Fox Williams able to. It comes down to flexibility. You are Other firms concede not going to get part-time partnership if you privately that it does affect the are going to insist on never working a Friday partnership track, and part-time don’t actually expect a partner and always leaving at 5.30pm,’ she says. associates are expected to move to full time at Linklaters to be available for a few years before promotion, to ensure Vikki Massarano, a pensions partner at 100% of the time. They that they get the right level of exposure to DLA, says: ‘In terms of the service delivery recognise that you have other clients and partners. that other partners see, they don’t see it’s clients and other commitThe issue of part-timers is undoubtedly a impaired. They know if they want me on a ments,’ she says. difficult one for all firms. ‘I think when it matter they have to give me some notice, but Susan Black, a competition started there was a concern that everybody I have flexible childcare arrangements and I partner at Herbert Smith, adds: would want to do it,’ says Carol Shutkever, can always be available on a particular day. ‘Some clients don’t realise. a corporate partner at Herbert Smith. ‘But It’s just like working weekends – it happens.’ Provided you do what you it’s not some great panacea; it’s very hard.’ ‘We would never say there’s an area where have to do in the same way as ‘It was very, very, very tough to it can’t work,’ Cole at Freshfields adds. ‘It’s all anyone else would, you could negotiate,’ Herbert Smith’s McKibbin adds. down to the individual and the team envibe in Brussels on a matter, or ‘I started the negotiations six years ago and ronment they’re in, and, most importantly, in a meeting; it doesn’t actually it took me 18 months to get it agreed. our client relationships.’ make too much difference When I asked for it to be renewed last year, Ultimately, it depends on a partnership’s to them.’ it went through quite easily. evaluation of the commitment levels of a Indeed Black’s client Ian ‘There are still no other equity partners minority of their partners. ‘When partners Houghton, the company that do it, but I have to say that I know the are doing 100%, they do more than 100%,’ secretary and director of legal world has moved on at Herbert Smith. Birtwall says. ‘When we are doing 80%, we services at WHSmith, says: ‘We There is still an inherent problem with it, do more than 80%. But it has given me get a very good service, but life has moved on.’ more balance in my life.’ She and I don’t think Without doubt the biggest argument adds: ‘That 80% is only a anyone here has ever against the concept is that you need to be measure of hours for the complained that they available for clients at any time of the day purposes of statistics; it is could not get Susan or night. While some concede that it can not a measure of my when they wanted her. work in areas like employment, they will commitment to the firm.’ Most of the time it is say it is impossible in corporate or largeThe commitment now, as Susan that responds scale litigation. ‘It’s not something necessar2004 draws to a close, must to queries directly, ily that visible to my clients, and certainly it be to find a fairer solution for whether she’s in the is not the first thing I would expect them to partners who have other office or not. With know about me,’ Caroline Miller Smith, a needs on their time. With anybody, there are projects partner at Linklaters, says. ‘I would experts fearing that discounts times when people go rather they thought I was an excellent beyond pro rata may equate on holiday and others lawyer first, and then found out second that to discriminatory policies, law cover their work, so I worked flexibly. firms must do their utmost to you expect it. Other ‘In intense periods I will work five days a avoid such a tag. LB people pick up her week, and in less intense periods, clients claire.smith@legalease.co.uk Massarano: service delivery isn’t impaired
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