Law Firm Management

Aren’t Non-Equity Partners Really Just Glorified Associates?

With a nod to the danger of generalizing, I would have to say that as a group, I like non-equity partners (“NEPs”) just as much, if not better, than I like equity partners. They are often people who are primarily interested in practicing law and doing well by their clients, as opposed to promoting themselves and reaching the top of the earnings heap.

On the other hand, I don’t think much of the whole concept of non-equity partnership.

Let’s start with the definition of “partnership.” The definition in Section 2 of the Partnerships Act (Ontario) is as good as any other: It says that, “partnership is the relation that subsists between persons carrying on a business in common with a view to profit.”

So, if that is the definition, what would you call someone who works at a business for a fixed amount of money or a percentage of their personal production, without reference to the profitability of the business? That would be an employee (or contractor).

I may be slow, but I just don’t get how law firms are permitted to announce to the public that people  who are really something else are “partners,” all the while labelling them as NEPs internally.

We know why they do it: It is to mislead clients into thinking that they are dealing with real partners; to feed the ego of NEPs; to give NEPs some tax advantages; to offer the illusion of promotion to a  higher level within the firm without having to split the profit pie into more pieces  (often to keep NEPs from moving on); and sometimes to misrepresent how many women and visible minorities are partners in the firm.

The question is why in a profession which prides itself on the importance of ethics and transparency, this charade is permitted to continue. (Let’s not even get into why the tax department tolerates it.)

Now understand that I think that being a partner in a law firm is over-rated and I don’t actually buy into the notion that being a partner necessarily means that you are a better lawyer than someone who is not a partner. But clients do believe this to be the case, which is precisely why lawyers would rather call themselves ‘partners’ than ‘associates’ and why law firms are happy to accommodate them even when they are not willing to make them real equity partners.

It is all being done to fool clients. Isn’t there something wrong with that?  Shouldn’t the Law Society put an end to it (with the possible exceptions of using it as device to introduce equity partners into a new firm or to ease equity partners into retirement?)

How can a profession which prides itself on its ethics continue to propagate this ruse?

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