PracticeAccounting FirmsDiscrimination: play fair

Discrimination: play fair

Firms need to be careful to avoid discrimination when selecting partners for departure

Over recent months an increasing number of female partners have expressed the
view that they have been unfairly and particularly targeted by the processes for
selecting partners for exit.

These partners mostly appear to fall mainly into certain key categories.

There are those female partners who have taken periods of maternity leave and
whose financial performance has been affected both by their absence and by the
time it takes to rebuild their figures on their return.

Junior equity partners who are still building their practice and may need
longer and need more support to re-establish themselves on return from maternity
leave seem to be particularly affected by financial-based partner selection

Female partners who take two periods of maternity leave within a period of
3-5 years, again appear to be more frequently affected by financial based
selection criteria ­ either due to the reality of their practice and performance
being affected by two or more relatively close periods of leave or by the unfair
perception of lack of commitment to being a partner.

Female partners with childcare responsibilities who work part-time are often
more likely to be adversely affected by financial performance selection
criteria; we have seen cases where, in their haste, the firm actually forgot
that the partner worked part-time and that a pro-rata adjustment needed to be
made to financial targets.

On reassessment, they discovered in one case that the partner was actually
overachieving against targets, however, the damage was done to the relationship
with the partner. In other cases the female partner has felt that the selection
process was simply used as a covert way to remove part-time partners.

An increasing number of female partners in predominantly male firms or
departments have suddenly been faced with an unexpectedly negative partner
development review, which is then used as the basis for their selection for dep
arture. A history of decent or even excellent appraisals may have been ignored
in the firm’s decision to select in such circumstances.

Discrimination Protection
Section 11 of the Sex Discrimination Act 1975 makes it unlawful for a firm
(including an LLP) to discriminate against female equity partners in relation
to, amongst other things, expulsion or by subjecting them to any other
detriment, including for example by ‘de-equitisation’.

As the courts have recognised direct evidence of discrimination is rare and
tribunals have to infer discrimination from all the material facts, a female
partner is assisted somewhat by the burden of proof in these cases.

She has to prove facts from which inferences could be drawn that the firm has
treated the female partner less favourably on the grounds of sex. If she does
so, then the burden of proof shifts automatically to the firm, which must then
prove on the balance of probabilities that the expulsion or de-equitisation was
not on the grounds of her sex.

If the firm does not provide a satisfactory non-discriminatory explanation
for the treatment, the tribunal must draw an inference of discrimination against
the firm.

If the firm does not have a thorough, well thought out and consistently
applied system and paper trail to support the assessment and selection process
for partner exits, they will find themselves at a disadvantage in trying to show
a non-discriminatory reason for selection.

If the female partner is successful, her main remedy is loss-based
compensation, subject to a duty to mitigate, but without any maximum limit.
Given the challenges in the current market, this could run to a number of years’
profit share, including any shortfall suffered if a lesser paid role elsewhere
is secured.

There is also normally a relatively modest award for injury to feelings.
Subject to certain limited exceptions, any claim must normally be brought to an
employment tribunal within three months of the relevant act of discrimination.

However, while the recently publicised £40m race claim against a leading firm
of accountants may suggest otherwise, the greatest cost to a firm facing any
discrimination claim is usually the potential long-term damage to its brand, its
reputation, its recruitment, its retention of female talent and its ability to
satisfy the exacting equal opportunity requirements of multi-national
corporations in new client tendering processes.

Taking simple best practice steps to prepare for partner exit processes and
minimise the risk of discrimination claims should be a core component of any
firm’s risk management and business planning processes.

Clare Murray is managing partner at specialist employment and partnership
law firm, CM Murray LLP.


Twenty-one days; ten days; two hours: the diminishing periods of advance
warning that many equity partners are now being given by senior management of
their imminent departure from the firm.

And the impression in some cases is that an equally short amount of time may
have been dedicated by senior management to assessing the legal risks, planning
the strategic and tactical handling, and documenting the selection process for
those partner departures. This can often severely undermine the firm’s possible
defence to such claims.

Discrimination cases are often cracked open by a well-placed written
grievance by the partner, a subject access request under the Data Protection Act
1998 (which, in summary, requires the firm to provide to the partner copies of
all their personal data held by the firm in manual files and on its computer
systems – such as emails and memos about the partner, within 40 days and on
payment of only £10) and a detailed discrimination questionnaire submitted to
the firm.

Such standard processes frequently expose any vulnerabilities and flaws in
the firm’s selection process.


? Get your ducks in a row: carefully consider, in advance, the firm’s powers
and obligations in relation to proposed partner exits; non-discriminatory
selection criteria; the exit process and tactical options; whether there are any
alternatives to departure – for example, de-equitisation, consultancy, part-time
working, etc; if no exit deal can be reached, expulsion options and any partner
right of response.

? Put your paperwork in place: document the need to make cuts in the
partnership, where such cuts need to be made and why, and the basis of
assessment of partners for potential exit, including the selection criteria and

? Remember that relying purely on financials can perpetuate discrimination:
avoid adopting simplistic selection criteria, such as pure recent financial
performance, which may disadvantage certain categories of partners and amount to
unlawful discrimination. Factor in other relevant values into the selection
process, such as team contribution, technical skills and support, client
relationships, etc. If the results of your initial selection process appear to
target certain categories of partner, such as maternity returners or part time
working mothers, revisit your criteria and the selection pool of partners.

? Allow enough time: bouncing a partner into a forced exit in a very short
timescale will only reinforce the partner’s perception that the decision is an
unjustifiable knee-jerk reaction and potentially discriminatory.

? Anticipate what an exiting partner will want: consider the two things that
an exiting partner normally needs most – time to find a new role while still in
the office and a financial cushion to support them for a reasonable period if
they cannot.

? Prepare the exit agreement in advance: having a decent exit agreement ready
in advance for the partner to take away from the first meeting is tactically
vital for an amicable exit.

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