THE LAWYERS WEEKLY
July 20, 2012 | 21
BUSINESS
CAREERS
While the courts continue to wrestle
with the legality of mandatory retire-
ment clauses in law firm partnership
agreements, there continues to be
heated debate within the legal profes-
sion as to whether such clauses help or
hinder a firm’s long-term success.
In simple terms, mandatory retire-
ment clauses were established as a
way of creating a less discretionary,
more transparent transition for sen-
ior partners and their clients to other
members of the firm. Such clauses
allowed firms to better plan for suc-
cession given a fixed retirement date,
and eliminated some of the poten-
tially awkward conversations around
asking underperforming senior part-
ners to gracefully bow out at the end
of their career.
Proponents often argue mandatory
retirement creates a more seamless
succession experience for the firm’s key
clients, improving its chances of keep-
ing long-term clients beyond the senior
partner’s retirement.
For senior partners critical of such
clauses, they point to some of their
more intangible benefits to the
firm — mentorship, training, client
relationships, and their roles as elder
statesmen (both inside and outside the
firm) as key contributions lost by the
rigid imposition of a mandatory retire-
ment policy.
Many senior partners see such
clauses as the emergence of a more
mercenary approach to the practice
of law, where the firm is viewed solely
as a business, and not as a commun-
ity of professionals whose contribu-
tions are not measured solely in
financial terms. By contrast, many
younger partners are frustrated by
wanting access to the firm’s blue-chip
client relationships, and not wanting
to have to pay for what they often
characterize as underperforming sen-
ior partners whose larger salaries dir-
ectly impact on their share of profits
within the firm.
Some firms have created modified
mandatory retirement clauses—com-
monly with a “reverse onus” clause,
requiring the lawyer to demonstrate his
or her value and ability to contribute to
the firm beyond a set age (typically 65).
For many, however, the clause has been
rigid, with little modification in order
to mitigate claims of selective applica-
tion of the rule, depending on the con-
tribution of the specific partner.
Curiously, in recent years, a few
firms have either reversed course (one
of Canada’s major national firms
recently lifted their mandatory retire-
ment clause), or have begun to more
purposefully highlight their absence of
a mandatory retirement clause as a
means of recruiting capable, senior tal-
ent, pushed out by their competitors.
From a recruitment perspective,
this suggests the market recognizes
there is a value to senior partners, par-
ticularly where their practice and
client relationships are portable to a
new firm.
The challenge this presents to
firms with mandatory retirement
clauses is they will need to evaluate
whether a blanket provision properly
aligns with the long-term success of
the firm. Where the clause success-
fully removes a partner who was
either (a) planning on retiring any-
ways, or (b) was primarily a service
partner whose compensation did not
properly match overall contribution,
then the clause may be viewed as hav-
ing achieved its objectives.
However, where the clause forces an
otherwise capable partner with a port-
able practice to move to another plat-
form, firms may rightfully be concerned
their retirement clause may be doing
more harm than good to the firm’s over-
all success.
The key for any firm is to consider
whether their current mandatory
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retirement clause, on balance, pro-
vides greater benefit to the firm than
harm. However, to fully measure the
cost of the clause, firms would be
advised to consider not only the inter-
nal costs (senior partner departures),
but the external opportunities that
may be present in a market (attracting
senior talent) by having either no
clause, or alternatively, a modified
retirement clause.
As some firms are discovering, by
not having a retirement clause, they
have positioned themselves to attract
star, senior talent in the market away
from those firms who have not prop-
erly considered the impact of their
retirement clause in the market
today. n
Warren Smith is a managing director
of The Counsel Network, Canada’s
oldest lawyer recruitment and career
consulting firm. He is the only Can-
adian on the board of directors of the
National Association of Legal Search
Consultants. Follow him on twitter
@lawheadhunter.
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