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One of the nation's largest law firms has agreed to pay a $27.5-million settlement to 32 former partners to end a ground-breaking age discrimination case, the Equal Employment Opportunity Commission announced today. The case against Sidley Austin, which has more than 1,700 lawyers in 16 cities, including Los Angeles, had been closely watched because of a widely held belief in the legal profession that firm partners did not qualify for the protections of federal anti-discrimination laws because they were deemed "employers."

But the EEOC, in a lawsuit filed in 2005, contended that the cashiered 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 protections of the Age Discrimination in Employment Act.

The firm vigorously defended the case, but lost key preliminary rounds in U.S. District Court in Chicago and at the U.S. 7th Circuit Court of Appeals. The Supreme Court declined to review the decisions. Eventually, the Chicago-based firm decided to settle by agreeing to a consent decree without admitting wrongdoing.

However, Sidley Austin, in the consent decree, approved by U.S. District Judge James B. Zagel in Chicago on Thursday, made a significant concession, agreeing "that each person for whom the EEOC has sought relief in this matter was an employee within the meaning of" the Age Discrimination in Employment Act.

The decree also includes an injunction that bars the firm from "terminating, expelling, retiring, reducing the compensation of or otherwise adversely changing the partnership status of a partner because of age," or "maintaining any formal or informal policy or practice requiring retirement as a partner or requiring permission to continue as a partner once the partner has reached a certain age."

John Hendrickson, the EEOC's regional attorney in Chicago, said he thought the outcome set an important benchmark.

"Up to now, with no particularly good reason that I can discern, people in control of law firms said that if they called someone a partner ... they didn't need to worry about federal employment discrimination laws," he said.

"What the Sidley case says is that you have evidence that people are called partners, but in reality are not active in the governance of the firm and don't control their own destiny in the firm. You can call them whatever you want, but for the purposes of the Age Discrimination Act they are employees," Hendrickson said.

He said the case ensured "the protection of professionals from discriminatory employment actions" and ratified the authority of the EEOC "to investigate and obtain relief for victims of age discrimination on its own initiative."

During the litigation, the U.S. 7th Circuit Court of Appeals ruled that the agency was entitled to obtain records that could show whether the lawyers should have been protected under age discrimination law.

In that key ruling, Judge Richard Posner, writing for a unanimous three-judge panel, rejected Sidley's argument that the law did not apply to partners. Posner said he was particularly unconvinced by "Sidley's contention that since the executive committee [of the firm] exercises its absolute power by virtue of delegation by the entire partnership in the partnership agreement, we should treat the entire partnership as if it rather than the executive committee were directing the firm. That would be like saying that if the people elect a person to be dictator for life, the government is a democracy rather than a dictatorship."

Ronald S. Cooper, the EEOC's general counsel in Washington, emphasized the broader ramifications of the settlement.

"The demographic changes in America assure that we will see more opportunities for age discrimination to occur. Therefore it is increasingly important that all employers understand the impact of the Age Discrimination in Employment Act on their operations and that we reemphasize its important protection for older workers," he said.

The amount to be paid to each of the 32 former Sidley lawyers was placed under seal. However, the EEOC said that the payments averaged $859,375 per attorney, and ranged from a low of $122,169 to a high of $1,835,510. The EEOC said each of the lawyers either had been "expelled from the partnership in connection with an October 1999 reorganization or retired under the firm's age-based retirement policy."

The EEOC began an investigation of Sidley in 2001 after major changes at the firm. According to the suit, the firm for many years had a mandatory retirement age of 65. But in 1999, 32 lawyers -- all over age 40 -- were told that their status was being downgraded from partner to "special counsel" or "counsel," and that their pay would be reduced by about 10%. They also were told that they would soon have to leave the firm.

David A. Richards, one of the 32, said he thought the firm had taken the action, at least in part, to increase profits for the remaining partners. Richards, who was 54 at the time, said when he was told of his change in status, there was "absolutely" no contention that managing partners had problems with his performance.

A year or so later, Richards landed a job with McCarter & English, a large New York firm, where he still works as a real estate lawyer. On Friday, Richards said, "The settlement was overdue, but it gives all involved a satisfactory conclusion." The lawyers who sued now "have confirmation that their discharge was not for the quality of their work."

The commission, Richards emphasized, "has established an important legal principle for all large professional partnerships."

Sidley, through a New York public relations firm, issued a formal statement saying that it "believes that settling this case is preferable to the costs and uncertainties of continued litigation."

"This settlement puts the cost, time and distraction of this litigation behind us. Moreover, continuing litigation with the EEOC would have placed us in an adversarial position with former partners."

The firm said it continued to employ some of the lawyers who were stripped of their partnerships in 1999, but did not say how many.

The consent decree in the case runs until Dec. 31, 2009. During that period, Abner Mikva, a retired federal appeals court judge who also served as a Democratic congressman from Illinois and White House counsel during the Clinton administration, will monitor any complaints from former Sidney partners and report them to the EEOC.

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