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Legal Ethics

Truth In Advertising Part Two

I have written before about how lawyers are usually fairly good at dealing with their clients in a truthful manner in the course of providing legal services, but not quite as accomplished when it comes to their marketing. Let’s look at this in the context of the most basic element of law firm marketing – how law firms identify their lawyers to the public.

In the world of law firm partnerships, the legal relationship of every lawyer with their firm falls into one of four categories. I want to focus on three of these categories.

First, there are equity partners. These people are the people who really matter. They own the place, invest capital, have a vote, share profits, and incur losses. Law firms call them ‘Partners.’

Next there are the non-equity partners. They do not invest money. They usually do not have a vote, and likely are not even invited to the partnership meetings. Their compensation is either a fixed amount, like an employee would receive, or based on a formula related to their billings. They do not share in the overall profits or losses of the firm. Essentially, they are glorified employees. Since ‘glorified employee’ does not have any real panache to it, law firms also call them ‘Partners.’

The third category are employees. Sometimes these people are working their way up to being non-equity partners or equity partners. Sometimes they are just long-term employees. They are commonly identified as ‘Associates.’

(The final category are independent contractors who provide legal services to the firm’s clients. Since ‘Independent Contractor’ is also somewhat lacking in sizzle, they are typically referred to as something like ‘Counsel’ or ‘Senior Counsel’ or ‘Special Counsel.’  Perhaps I will write about these folks another day).

The distinction between equity partners and non-equity partners is not particularly transparent to the law firm’s clients or even to other members of the profession. Clients typically think that all Partners are the same. Other members of the profession know that all Partners are not the same, but they don’t know who falls into which category.

From the client’s perspective, the word ‘Partner’ suggests that the lawyer has met certain criteria concerning their experience and expertise and been accepted into the upper echelons of the law firm hierarchy. The clients think that this means that the lawyer is likely to be a better lawyer than someone who is not a Partner. (This may not be true at all, but that is a topic for another day.)

For Associates in their early years of practice, not being a Partner is fine. But Associates who have been at the legal game for a long time sometimes feel that their credibility with clients is diminished by not being a Partner. And, if the truth be known, they are sometimes embarrassed to be Associates. Also, being a Partner comes with some tax advantages. (Although I stand to be corrected by the tax experts, it has always seemed to me that for some reason, the Canada Revenue Agency has never been particularly concerned about getting to the bottom of how someone can claim to be a partner while not being allowed to share in profits or required to contribute to losses.)

From the perspective of a law firm, it may have valid reasons for not inviting an Associate to be an equity Partner but also want the Associate to be called a Partner. Perhaps they want to be perceived in the marketplace as having more Partners than they actually have, or as having a Partner in an area of practice which is staffed exclusively by Associates. Or, maybe they want to use the status of a non-equity partner as a steppingstone up from the Associate level to the equity partner level or down from the equity partner level for someone who is transitioning to retirement. Another possibility is that they want to assist the Associate to have more credibility in the marketplace. Or maybe they just want to throw the Associate a bone by permitting them to be called a Partner and to obtain some tax advantages, possibly instead of giving them a raise.

All of the foregoing eloquent prose was included just to set the stage for the following proposition:

Law firms routinely and intentionally mislead their clients by identifying people who are Partners in name only in the same manner as they identify the real owners of the business, expecting clients and others to draw certain inferences as to their status in the firm and the achievements that merit such status.

So, my rhetorical question for the profession is this:  Really? Shouldn’t we be better than this?

Post-Script

I have recently become aware of one Ontario firm which lists on their website that they have Partners, Associate Partners and Associates. I can only imagine what an Associate Partner is, although my best guess would be that they are non-equity partners. On the one hand, you have to give this firm credit for making public the fact that they have two different varieties of partners. On the other hand, they have not contributed much to eliminating the confusion as to what the difference is between the two categories.

Second Post-Script

I posted this article on LinkedIn and received some feedback from several sources which I found to be very interesting. The point made was that some large law firms are using the non-equity partner category disproportionately for female lawyers and lawyers of colour, which allows them to claim greater diversity at the partnership level than they actually have in the equity partner category where it counts. Apparently in some firms the non-equity partner group is referred to as the pink ghetto. Imagine that – an old white guy like me writing an article on this topic and not knowing that!

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