_{Not the employment dispute experience the firm was expecting}

A former employment partner at Howard Kennedy, who was paid £225k a year, has lost a claim against the firm that he was underpaid. 

Partner James Townsend brought a claim against Howard Kennedy for unauthorised deductions from wages, as well as claims for holiday pay and consequential loss.

Townsend joined the firm's employment team in January 2020, as a fixed share partner on a gross sum of £225,000 until the end of that financial year (the end of April). It was agreed that from May 2020 he would rise to equity partner, with his share of profits calculated on his allotted equity points. 

The parties proceeded with Townsend being given 40 equity points, based on a value of £225k, although the number of points were not set out in the agreement. 

The impact of Covid that year, meant that the firm scrambled to revise its budget just before Townsend became an equity partner, reducing its projected billed fees by 8% and total income by 12%. The firm's managing partner, Craig Emden, realised that this might result in Townsend's 40 equity points achieving less than an income of £225k.

In light of this, the managing partner held a meeting with Townsend where he offered two options: he could remain on 40 equity points (with the risk that the profit share would reduce his income), or take a fixed share of profits at £225k for the 2020/21 financial year. 

Townsend agreed to the latter. He told the tribunal that his personal circumstances at the time meant that he needed security and a fixed income: he had re-mortgaged due to a building project at his home, his wife was a key worker, he had three young children, and there was also the uncertainty of the pandemic.

The following year, in Townsend's self-evaluation form of May 2021, he suggested that the market value of his contribution "should allow for annual drawings in excess of £300,000" and that "an appropriate adjustment" to his equity points should be made. 

Emden and Townsend had a meeting about this, where Emden recorded a note saying "getting 300k as he asks is a bit toppy, more than a third," noting that a third would be around £266k. 

However, the firm increased Townsend's equity points from 40 to 45 for the following financial year, and gave him a discretionary award of £35k.

Townsend gave notice of his 'retirement' from the partnership in January 2022. During his exit interview, in September that year, he opined that the "remuneration structure is an issue", but did not expand on that, or refer to his own wages. 

However, having departed from Howard Kennedy, Townsend fired more than a parting shot, as he claimed in email exchanges with the firm that he was "entitled" to 56 equity points for the 2020/21 financial year, and that over £176k had been "unlawfully deducted" from his wages, and that sum with interest should be paid to him. 

The managing partner rebutted the claim, but Townsend (burning all bridges behind him) argued that Emden had acted ultra vires. 

At an employment tribunal hearing, the judge ruled that "there was no attempt" by Howard Kennedy "to mislead or to misrepresent matters" to Townsend, as the firm had indicated 40 equity points would be allocated to him, in its offer letter. The tribunal stated "there was specifically no entitlement to 56 Equity Points" (although noted an argument that Townsend should have been awarded 43 points).

Townsend criticised Emden’s conduct in the meeting where the fixed-share option was offered, saying the managing partner imposed the variation and that he was not in a position to challenge it.

The tribunal said it did not accept that the employment partner was "rushed into a decision" to accept Emden's proposal for a fixed share, or that Emden "intimidated him". The tribunal stated "it is more likely" that Townsend "recognised the variation Mr Emden proposed of a fixed-share, was a far better deal". 

"Although the claimant was no longer a fixed-share partner and was an equity partner...the second option would guarantee him an income and (unless the respondent became insolvent) remove practically all of the risk for him during the pandemic," said the tribunal, noting that the other equity partners did not have the benefit of such a guarantee.

The tribunal also found that Emden had not acted ultra vires.

The tribunal dismissed the claim. 

A Howard Kennedy spokesperson told RollOnFriday: "We welcome the judgment which completely exonerated our firm and dismissed the claim in its entirety."

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