Several years ago the U.S. Equal Employment Opportunity Commission made headlines by filing a class action lawsuit against Sidley Austin, the first of its kind against a law firm. The suit alleged that the firm had maintained an illegal "age-based retirement policy" since at least 1978 and had arbitrarily forced out 32 partners in 1999. Historically, law firm partnerships have not been subject to discrimination laws because partners, as the co-owners of an enterprise, were considered employers, and therefore not covered by age discrimination law. The EEOC alleges that the "retired"/"fired" lawyers were partners in name only because they had no voice in the firm's management - including hiring, firing and salary decisions. Consequently, the lawyers were "employees" entitled to the protections of the Age Discrimination in Employment Act.
Fast forward to a recent story in The New York Times. The paper reported that, in a survey last year of 46 law firms with 100 or more lawyers, about 57% of the surveyed law firms reported a mandatory retirement age, ranging from 65 to 72, according to a survey conducted by Altman Weil. And the issue of age is arising at an earlier date in these law firms, just at a time when our population is living longer, healthier and more active lives than ever before.
In large firms, there is sometimes a perception that older lawyers need to be given a push out the door by their fellow, younger partners. Given the "eat what you kill" compensation systems at many firms, senior partners may not want to share information on clients or prospects with the next-generation lawyer who might "steal" business before the first attorney is ready to step away from active practice. Age is only incidental. The firm needs to take a firm-wide approach to serving clients that keeps all lawyers functioning and integrated as partners. One approach might be for the older lawyer simply to receive the designation of "special counsel" or "emeritus partner" and continue to enhance the law firm while another lawyer in the firm takes over the client list.
In a sole practice or small firm the issue is different. Failure to plan for how your clients will be taken care of as you age can, according to some authorities, be construed as reckless disregard for client welfare - a true ethical violation. Solutions for sole practitioners include grooming a successor by hiring an associate to learn the practice, or merging with or hiring a lateral, with the option to sell the practice to him or her, and selling the practice now with a consulting arrangement to continue practicing for as long as you choose.
With a succession plan in place, older lawyers who keep up with evolving professional rules and trends through MCLE should have no trouble remaining in practice as long as desired.
Volume discounts revisited.
In a recent Ezine we addressed the issue of volume discounts and how they can mitigate against a lawyer's financial interests if not properly approached. A coaching session with a client brought home to me again the importance of this issue, particularly when clients continue to raise it as a billing alternative.
I spoke with a lawyer who focuses on intellectual property - a practice that is much in demand today. A prospective client approached this lawyer with the possibility of work, and in return asked how much the lawyer was willing to discount the lawyer's rate of $(x) per hour. The advice I offered to this lawyer was threefold:
First, state that your billing rate is $(x); do not talk about discounts, reduction in fee, or any other modification of your hourly rate. To do so would be to negotiate against yourself and against your self-interest. If in the same breath you quote your fee, then start talking about discounts, you are saying that you are not serious about your own fee.
Second, if the client asks whether $(x) is the least expensive rate you can charge, raise the idea of a volume discount. You are prepared to discount your rate from $(x) to $(x-y), - if, and only if, the client is prepared to guarantee, for example, 20 hours of work per month for a minimum period of time, say six or nine months.
Third, if the client is willing to commit to the amount of hours and the time period, as part of the agreement, the client should pay the discounted fee of $(z), the product of 20 hours times $(x-y) per hour, at the beginning of each month. In other words they have to pre-pay that amount. If the client needs more than the committed number of hours of work in any given month, the additional work will be billed at the discounted $(x-y) rate per hour under billing terms the attorney typically uses (for example, payable within 30 days of the billing).
Approaching the idea of discounting this way says that you are a businessperson; that you have certain policies in place; and that you are willing to treat clients fairly when they treat you well. In other words, the quid pro quo for a discount is a guarantee that the pre-determined amount is paid in advance of performing the work each month.
A productive cross-border relationship.
For more than a year I have been privileged to write for the members of the Canadian Bar Association, through the organization's CBA Practicelink electronic journal. We've covered topics as diverse as budgeting client engagements and planning firm retreats. It has been a learning experience to see first hand some of the differences in the way that law is practiced in our northern neighbor. For example, after I did an article on client relationship management databases, a reader commented that strict Canadian privacy laws could have a major impact on how CRM systems are used by law firms.
I researched the issue and found that Canada's Personal Information Protection and Electronic Documents Act (also known as PIPEDA), covers all personal information of customers that is collected, used, or disclosed in the course of commercial activities by private sector organizations. According to the Act, customers have the right to gain access to and correct information maintained by business; in addition, customers are given the right to file complaints with the Privacy Commissioner of Canada. The Act does not directly affect the recording of information in a CRM database as a result of interacting with a client/customer. It was, however, an eyeopener that Canada provides perhaps more substantial privacy protection to its citizens than we do in this country.
More recently, I spoke to the CBA's members in a teleseminar about fee collection problems. In this podcast, which the CBA helped create, we took a fresh look at how lawyers can protect themselves and increase their realization rate for better cash flow. Look for this new podcast, and review our latest articles for the CBA's members, on www.lawbiz.com. We already have upcoming articles scheduled on financial benchmarking and on coaching as a means of increasing ROY ("Return on Yourself"), so I look forward to a continued relationship with the Canadian Bar Association and its members.
Published On:
12/01/2006
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