So Eversheds is reconstructing its entire partnership because it doesn’t want to be ageist. Even bearing in mind that it’s the job of employment lawyers to scare their clients witless, that’s a pretty apocalyptic vision of the forthcoming age discrimination legislation.
The notion that lockstep remuneration could be discriminatory was first floated a couple of years ago. Most law firms have since examined the proposed legislation and the vast majority of managing partners profess themselves unconcerned. They argue that most decisions on partnership structure can easily be justified by business need.
The lockstep system is unabashedly ‘pay by seniority’ and was initially the focus of debate. However, employment lawyers chorus that lockstep is easily justifiable. Some argue that firms which operate a mix of merit-based pay and lockstep – that is, the vast majority of firms in the UK – are theoretically more vulnerable.
One leading employment specialist says you can easily construct a case on behalf of a younger partner, say, who is exiting a firm in a strop. If their billings are way in excess of more senior partners, who are relying on their seniority to underpin their equity share, then you have a potential claim
And yet, and yet… Is this really what lies behind Eversheds’ move? There’s a difference between responding to justifiable concerns on age discrimination and a wholesale shake-up of the remuneration structure.
Citing age discrimination is a nice rhetorical gambit, but Eversheds isn’t basing this on preventative measures. What’s going on is a fundamental shake-up at the firm. There was a major management reshuffle a couple of months ago and senior sources privately admit that they have been pruning the equity partnership over the past year.
According to The Lawyer UK100 last year, the equity spread for Eversheds partners ranged from £220,000 to £525,000, with an average of £350,000. Not that the average equity take is a meaningful number in this context. Eversheds’ sprawling empire has large costs attached that pull down average profitability.
What Eversheds’ new scheme really means is that the differential between top and bottom will be stretched – itself a tacit admission that it has so far failed in London. In order to crack the City, Eversheds is not only pouring cash into a new headquarters, but is gearing up to pay its top people more.
Top marks for spin, though.