Firms’ compulsory early retirement schemes fall foul of new legislation

The system of compulsory early retirement used by many UK law firms is resulting in a damaging ‘brain drain’ and may also fall foul of impending age discrimination restrictions, according to market experts.

Compulsory retirement ages that differ from the legal standard of 65 will become unlawful under new regulations set to come into force in October 2006. According to the Department of Trade and Industry, partnerships will be obliged to comply with the legislation.

Allen & Overy (A&O), for example, is understood to operate a compulsory retirement age of 55 in the UK.

A&O, which operates a ‘soft landing’ system for retiring partners, has just 19 partners over the age of 50 in London, compared with 31 at Linklaters. The ‘soft landing’ enables retiring partners who have served at the firm for a given period to take a diminishing share of profits for five years after their departures. They can take the option at any stage.

The result is that A&O partners can realistically expect to spend only one year at the top of the firm’s 15-year lockstep.

A&O’s consultation on partnership is now examining how to better manage ageing partners. According to one A&O source: “We need to find a more sensible way of managing people who aren’t justifying their position at the top of lockstep. One would be an ‘of counsel’ role to keep senior people on a reduced profit share.”

Employment barrister Declan O’Dempsey of Cloisters Chambers believes it will be hard for law firms to justify a compulsory retirement age below 65.

“In the area of law, the role of a partner turns into a much more second-level operation,” he said. “The things you come to expect of a partner can still be done at that stage of a career.”

Partner statistics

Source: The Lawyer