March 17 (Bloomberg) -- The U.K. practice of awarding an increasing share of profits to lawyers and accountants based on seniority is threatened by a new anti-age discrimination law that could pit young partners against old, employment specialists said.

The ``lockstep'' compensation method generally gives senior partners more of the firm's profit and is in addition to performance-related bonuses based on revenue, or so-called billings. The new law, which will outlaw age-based discrimination unless ``objectively justified,'' may lead to litigation.

``Young partners who are billing above their weight may well seek to challenge the lockstep on the basis they are being penalized for their age,'' Gareth Edwards, a dispute resolution lawyer at Reynolds Porter Chamberlain, said March 15.

Unlike the U.S.'s anti-discrimination law, which protects older workers, the U.K. Employment Equality (Age) Regulations 2006 will outlaw unjustified bias against any age group. The legislation, due in October, also overrides partnership agreements that force older partners to step down at a specified age unless there is an objective reason, lawyers said. Cost considerations alone won't justify forced retirement.

The regulations are forcing firms to re-evaluate lockstep arrangements that have banded them together for decades.

``The junior partner gradually builds up the practice he inherited from previous generations as he ascends the lockstep ladder, which sets a benchmark against which his performance over a career can be measured,'' Richard Turnor, employment partner at London-based Allen & Overy LLP, said in an interview. ``Outlawing retirement ages and lockstep disrupts the cycle and discriminates against one generation compared with another.''

Equity Ladder

British solicitors, unlike their American counterparts, have clung to lockstep because it evens out profit distribution, especially over lean years. In general, equity partners, who share in the profit rather than draw a salary, are awarded points based on seniority as they climb the equity ladder to retirement, said Paul Fontes, an employment partner at London's Eversheds LLP.

The London-based Association of Partnership Practitioners, which represents about 320 partnerships in the U.K. including law firms and accounting firms such as Deloitte & Touche, successfully lobbied the government to let partners continue awarding merit pay for partners with less than five years service, Fontes said.

Firms can maintain lockstep merit pay for partners with more than five years service if they can reasonably argue it encourages motivation, experience and loyalty under Section 32 of the draft regulations.

`Reverse Age Discrimination'

That won't stop partners suing each other though, lawyers said.

``If you have a lockstep provision it is like reverse age discrimination,'' Stephen Ralph, a partnership specialist at London-based Dawsons solicitors. ``I'm sure there are ways of dressing this up, but it is a matter which partners are looking at in the context of the lockstep provisions.''

Sarah Gregory, an employment lawyer with London's Baker & McKenzie, said it is not just new lawyers who can cause waves. The law also applies to mid-career workers applying for management positions. Some management jobs, for example, require 10 years of experience.

``All of that is going to be called in question if the person says `Well I have only eight years experience but I think I can do the job as well as the next person,''' Gregory said.

Firms are not only debating whether their lockstep can be justified under the regulations, they are examining practical issues such as how a partner, employment tribunal or court might quantify a claim and whether they would consider merit, contribution or billings.

``Would a younger, hotshot partner argue that he or she should be paid more? How much more?'' said Andrew Brown, an employment partner at Herbert Smith LLP. ``Would a tribunal say to the firm that if it had a merit-based remuneration structure it would have paid the partner such-and-such amount?''

To contact the reporter on this story: Caroline Byrne in London at cbyrne12@bloomberg.net.

Last Updated: March 17, 2006 04:06 EST