Most law firm partners and LLP members will consider a move a least once in their career. The first issue to consider is: am I sure I want to leave? Better the devil you know can be powerful argument for staying. Once you have grappled with the decision to take the plunge and are clear that you are would like to meet with recruiters and potential firms, other issues become more pressing.
Any new firm will want to know what clients you might bring, how much they are likely to bill and what your personal billings are. They may also be interested in the prospect of team members joining you in your new home.
Key practical issues will be your applicable notice period and whether you are likely to be held to this or placed on gardening leave for all or part of this period; what the firm has done on previous exits can provide a helpful precedent.
You will also need to be clear whether you are subject to any restrictive covenants and the length of these covenants. The contractual framework you are bound by will usually be contained in the firm’s LLP or partnership deed and your deed of adherence. The typical restrictive covenants you can expect to find in many LLP deeds or Partnership agreements can include the following:-
- a non-compete – preventing you from joining a competitor firm;
- a non-solicitation and non-dealing with clients – preventing you from approaching clients or acting for them if they approach you; and
- a non-poaching of colleagues – preventing you from seeking to recruit colleagues.
For employees, restrictive covenants can typically last no longer than a maximum of twelve months following exit. This is not the case for partners and LLP members where covenants can be much longer in duration. There may also be so-called waiting room clauses to consider, restricting partners from leaving a firm if a certain number of fellow partners have left within a prescribed period. It is worth bearing in mind that flawed drafting can render a covenant unenforceable and advice should be sought. On occasion, it can also be possible to negotiate a reduction or release from covenants, particularly where there may be the prospect of future work introduction between firms or some form of co-operation.
You will most likely owe an express duty of good faith and certain implied duties to your existing firm and possibly also to fellow LLP members or partners. Depending on your position with the firm you may also be subject to so-called fiduciary duties which essentially oblige you to act in the best interests of the firm, rather than your own. You will also owe a duty of confidentiality which obliges you not to disclose confidential firm and client information to third parties (which would include your recruiter and any potential new firm).
In practical terms, it is very difficult to navigate an exit without coming into conflict with these express and implied duties and care will have to be exercised.
Whilst you are free to look for a new role you need to remember you cannot engage in this process during normal working hours when you are committed to providing your services to your existing firm. You also should not use firm property to look for a new role and the firm may conduct searches of your devices and work email and diary if it suspects untoward activity, particularly if it suspects a team move.
When you are planning a move which is likely to place you in breach of your obligations and any restrictions, it is worth considering requesting an indemnity from the firm you are likely to join in relation to any legal costs or exposure to a damages or account of profit claim. The new firm may resist providing this indemnity. A common argument which is raised is that this indemnity may be used as evidence of the new firm inducing a breach of the departing employee’s contractual obligations or restrictions, potentially placing the new firm at risk and there may be a need to negotiate this.
You should ideally sign up to your new LLP or partnership deed before resigning but as the new firm may want to take up references first, this not always possible. Any new firm will usually expect a couple of references including from your existing firm. They will also ideally like to have a client reference but again this may not be possible without placing you in breach of your obligations. On occasion, an intermediary third party or Counsel may be able to provide a helpful alternative reference.
It is worth remembering that irrespective of the size of the firm you are with, leaving can become a very personal issue for some of the other partners in the immediate team, or the firm overall, and it can be perceived as a personal rejection. In some cases the affected parties have described it feeling like a divorce and it is worth being prepared for those more emotional aspects of any departure. With a divorce you may be arguing about the children, the family pet or division of assets and in the case of a firm it will be the clients and return of any undrawn profit share and capital. Again, mostly the payment of current and capital account monies and any tax reserve should be set out in the LLP or partnership deed but on occasion there may be some room for interpretation and consequently, negotiation.
If agreement is not possible many partnership and LLP deeds provide for any dispute to be resolved by way of arbitration, although employment tribunal claims for discrimination or whistleblowing issues are still possible as is injunctive relief in the High Court.
In many cases, on exit you will be asked to sign a so-called ‘retirement deed’ which may include the need to take advice from an employment lawyer if a waiver of statutory employment claims is included. This agreement should set out the key terms including which clients can transfer, the messaging to clients and colleagues and how return of capital and payment of accrued profit share and tax reserve is to be dealt with. It should also include confirmation that the firm will indemnify you in the event of any claim (with the usual carve out for fraud and gross negligence) and confirmation that professional indemnity insurance will continue to apply in respect of the period served as partner or member.
In our experience the key to a smooth transition from the perspective of the partner leaving but also the soon to be former firm, is to keep the lines of communication open between the firm and the departing partner and to try and maintain a personal dialogue. This will go a long way to maintaining relationships with former colleagues, who can then of course turn into future contacts. However, if an amicable exit is not possible then specialist advice should be sought in order to protect your position going forward.