Law firms on the hook: Discrimination claims lawyers can bring

Over the last two years, we have seen a wave of lawsuits against Big Law firms, challenging harassment, discrimination in pay and promotion decisions, and retaliation against lawyers who have objected to inequities. For law firms used to defending others rather than themselves, the spate of litigation has been a wakeup call. In this article, we delve into the types of claims that law firms typically face and shine a spotlight on the law firm pay practices at issue in many of the recent cases against firms.

Law firms, like every other kind of employer, are subject to a multitude of federal, state and local statutes that prohibit discrimination, harassment and retaliation. Federal laws prohibit discrimination against employees based on sex, pregnancy, race, color, religion, national origin, age and disability, and state laws often confer additional protections. Many states, including California, also bar discrimination based on marital status, sexual orientation and gender identity. As long as a law firm is big enough, all of its employees -- including associates, paralegals and support staff -- will be protected under these laws.

While law firms generally argue that "partners" are business owners and not "employees" entitled to statutory civil rights protections, California's Fair Employment and Housing Act protects "any person" from discrimination, and this includes partners. Cal. Govt. Code Section 12940(a), (h); see also, e.g., Fitzsimons v. Cal. Emergency Physicians Med. Grp., 141 Cal. Rptr. 3d 265 (2012). Even under federal and state statutes that say they cover only "employees," partners often count under the test set forth by the U.S. Supreme Court in Clackamas Gastroenterology Assocs., P.C. v. Wells, 538 U.S. 440 (2003). Law firms typically exercise substantial control over their partners, and Supreme Court has recognized that partners "may well qualify as 'employees' [where] control is concentrated in a small number of managing partners." Id. It's a fact-intensive inquiry with many factors to consider, including whether the firm can hire or fire the partner, how the firm regulates and supervises the partner's work, whether the partner reports to anyone in the firm, and the firm's profit-sharing arrangement. At a minimum, law firm partners are entitled to discovery to try to prove they are covered by anti-discrimination statutes. See, e.g., Campbell v. Chadbourne & Parke LLP, 1:16- cv-6832 (S.D.N.Y. June 14, 2017). Our firm has represented scores of law firm partners, and in nearly every case we have found that the partners are "employees" entitled to avail themselves of civil rights protections.

Law partners experiencing discrimination also may have common law claims. It is well established that law firms owe a fiduciary duty to their partners, so partners who experience discrimination may have a common law claim that those fiduciary duties have been breached. Additionally, those who have signed onto partnership agreements may have breach of contract claims or fraudulent misrepresentation claims. Discrimination may violate specific contract terms, like those relating to pay or termination. More generally, a firm that discriminates may run afoul of the implied covenant of good faith and fair dealing; it is an inherent part of the partnership bargain that a law firm will not discriminate against its partners.

Finally, discrimination is not just illegal -- it is also fundamentally unethical. As the American Bar Association put it, "[d]iscrimination and harassment by lawyers ... undermine confidence in the legal profession and the legal system." As a result, more than two dozen jurisdictions across the country have made it an ethical violation for lawyers to discriminate or harass. Some, like California, specifically prohibit discrimination in connection with law firm operations; California bars lawyers from "unlawfully discriminat[ing] or knowingly permit[ting] unlawful discrimination" based on a host of protected characteristics, including in hiring, firing, and the terms of employment. Cal. RPC 8.4.1. Other ethics codes take an even broader approach. New York generally prohibits lawyers and law firms from unlawfully discrimination "in the practice of law." N.Y. RPC 8.4(g).

There are many types of illegal conduct that can get law firms in trouble, including sexual harassment, hostile work environments, and unlawful termination decisions. But for law firms, one of the claims that comes up most often is pay discrimination. Many firms make compensation decisions in a black box, while others share information with lawyers about the criteria used to make pay decisions. But even within a process based solely on seemingly objective metrics, bias and discrimination persist. Many practices that seem neutral in fact lead to gender disparities.

First, while a system that purports to reward work, or billable hours, has intuitive appeal, it does not ensure fair and unbiased decisions. See Anna Jaffe et al., Stanford Law School Women in Law Policy Lab Practicum, "Retaining & Advancing Women in National Law Firms," 16-22 (2016). Women lawyers frequently report that their hours are slashed or written off entirely by more senior male attorneys, depressing their billable hours. When downturns in the economy create less work for practice groups, work is often hoarded by male attorneys.

Second, compensating based on originations can also disadvantage women. While on the surface this method may sound fair and reasonable: an attorney who generates more money for the firm gets paid more, in practice the process of calculating and assigning origination credits is far from formulaic. See Lauren Stiller Rikleen, Presented by the ABA Presidential Task Force on Gender Equity and the Commission on Women in the Profession, "Closing the Gap: A Road Map for Achieving Gender Pay Equity in Law Firm Partner Compensation," 14-16 (2013). We often find that firms bequeath institutional clients and networks to male lawyers, while female lawyers must originate cases themselves without the support and resources given to men. Understanding that they must generate business on their own, many women spend substantial time fostering their own business development, only to have the firm prevent them from accepting the business.

Finally, pay decisions often incorporate subjective or amorphous qualities, such as "firm citizenship" or "overall contribution." These factors are often difficult to measure and can make comparisons between lawyers difficult. Jones Day, the subject of a recent lawsuit, goes so far as to say that "every associate's compensation is the product of his or her individual contributions, and cannot be fairly compared to any other individual." Tolton et al. v. Jones Day, 19-945 (D.D.C. 2019). However, when a firm decides to pay some attorneys more than others, the firm is inherently making comparisons, just without a clear reason. Firms using subjective metrics often give shifting and inconsistent justifications for pay decisions, indicating that they are not explanations at all, but rather pretextual justifications for discrimination.

Law firms must heed their legal and ethical obligations not to discriminate and be mindful that discrimination is often subtle. Even systems that seem designed to reward merit, like the compensation systems used at firms across the country, can systematically disadvantage women.