An employment tribunal has dismissed a claim from an equity partner that he was underpaid by his former London firm. James Townsend had brought a claim for unauthorised deductions from wages against Howard Kennedy LLP after arguing he should have received more than the agreed £225,000.
Sitting at London South tribunal, Employment Judge Wright dismissed the suggestion that Townsend was intimidated into accepting inferior terms by his managing partner and concluded he had chosen the less risky remuneration option.
Townsend, an employment solicitor, joined the firm in January 2020 as a fixed-share partner. He was offered a gross sum of £225,000 for the full financial year and from May 2020 it was said he would become an equity partner, receiving a budgeted share of profits. The firm operated an ‘equity points’ system, under which an equity partner was assigned a specific number of equity points, which in turn determined their profit share. His accession agreement referred to Townsend being ‘allotted equity points to the value of £225,000 or more’.
Before his accession to equity partner, the country was placed into Covid lockdown. Howard Kennedy reviewed and revised its budget, but Townsend’s allocation of 40 equity points was not addressed. Following a partners’ meeting, the firm reduced its projected billing estimates by 8% and its total income by 12%.
The tribunal heard that managing partner Craig Emden had been concerned that Townsend would not achieve an income of £225,000, and the solicitor was offered two choices: remain on 40 equity points and take the risk that income would fall, or accept a fixed share of £225,000. Townsend agreed to the second option.
Townsend told the tribunal that at the time he had remortgaged his home to fund a building project, his wife was a key worker and he had three young children. These all prompted him to take the fixed income.
The tribunal rejected the suggestion that Emden had been unreasonable during a meeting to discuss Townsend’s partner agreement. It also rejected Townsend's contention that the variation was unilaterally imposed.
For the following year, Townsend said in a self-evaluation form that he would like his remuneration to be in excess of £300,000. Emden recorded following a meeting that this was ‘a bit toppy’.
In January 2022, Townsend gave notice of retirement. In his exit interview later that year, he referred to the ‘remuneration structure’ as requiring change but made no reference to his own pay. He also made no mention of being underpaid and said the issue was he could not work with his head of department.
After his departure, he wrote to the firm saying he had been contractually entitled to 56 equity points and so he calculated that almost £177,000 had been unlawfully deducted from his wages.
However employment Judge Wright ruled that Townsend was never contractually entitled to a specific number of equity points. The 40 equity points were allocated and there was no attempt by the firm to mislead or to misrepresent matters to Townsend.
The judge added: ‘It is not accepted that the claimant was rushed into a decision or that Mr Emden intimidated him, as he now claims. It is accepted as per Mr Emden’s evidence that if the claimant had requested time to reflect, he would have been granted it. It is more likely that the claimant recognised the variation Mr Emden proposed of a fixed-share, was a far better deal than the position he was currently in.’
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