A Partner Title Is Not an Ownership Interest.

The case ended before the label received a verdict

On September 24, Reuters reported that Duane Morris and Meagan Garland had agreed to resolve her proposed class action after mediation. Their court filing said they were finalizing the terms. Garland, formerly a partner in the firm's employment practice, alleged that Duane Morris classified certain non-equity lawyers as partners even though they lacked an ownership stake, could be terminated at will, and did not share in equity-partner profits. She alleged that the structure shifted payroll taxes, benefit costs, and other business expenses to those lawyers.

Duane Morris denied wrongdoing. It argued in the litigation that Garland was a genuine partner whom the firm treated fairly and lawfully. The announced resolution does not establish that the firm's structure was unlawful, certify Garland's proposed classes, decide whether any non-equity partner was an employee, or supply a public damages measure. A settlement can reflect litigation risk, cost, uncertainty, business priorities, or compromise without adopting either side's account.

The court's August 2025 dismissal order is equally important to characterize correctly. Judge Cathy Ann Bencivengo allowed several claims to proceed and dismissed others, some with leave to amend. At that pleading stage, the court accepted well-pleaded factual allegations as true and asked whether they stated plausible claims. It did not find that Duane Morris misclassified Garland. The distinction between a surviving allegation and an adjudicated fact is especially important now that the case may end without a merits judgment.

Partnership has become several different products

Traditional partnership joined status and substance. A partner contributed capital or labor, participated in governance, shared profits and losses, owed duties to the enterprise, and accepted the risks attached to ownership. Modern law firms have separated those features into tiers. Equity partners may possess voting rights and residual economic interests. Non-equity, income, fixed-share, salaried, and contract partners may receive some combination of elevated compensation, business-development expectations, managerial duties, tax treatment, and market-facing prestige.

There is nothing inherently deceptive about a non-equity tier. A firm may reasonably want to recognize senior lawyers before offering permanent equity. A lawyer may prefer predictable compensation without a capital contribution or full exposure to firm risk. Clients may benefit from knowing that a matter is led by a senior professional. The problem begins when the title is asked to carry legal conclusions that the underlying relationship does not support.

The useful vocabulary has four columns, not one. Rank asks how the firm presents and evaluates the lawyer. Economics asks about capital, profits, losses, guaranteed payments, benefits, and expenses. Governance asks about voting, information, supervision, removal, and strategic authority. Legal status asks how a specific statute or tax rule classifies the relationship. A person can be senior in rank, junior in governance, economically fixed, and legally disputed. Calling all four partner does not make them converge.

Control matters because the law looks through titles

The Supreme Court confronted a related status problem in Clackamas Gastroenterology Associates v. Wells. The case concerned whether physician-shareholders were employees for purposes of counting workers under the Americans with Disabilities Act. The Court said the common-law element of control was the principal guidepost and endorsed six relevant questions: whether the organization could hire or fire the individual or set work rules; whether and how it supervised the work; whether the individual reported to someone higher; the individual's ability to influence the organization; what the parties intended in written agreements; and whether the individual shared profits, losses, and liabilities.

Clackamas does not supply a universal test for every wage, discrimination, partnership, or tax dispute. Statutory definitions and state law vary. Its deeper point is still durable: organizational labels are evidence, not magic. The legal inquiry asks what power and economic relationship actually exist under the governing law.

That is why the most revealing documents are often not biographies or promotion announcements. They are partnership agreements, compensation memoranda, voting provisions, capital-account records, tax allocations, benefit plans, termination rights, committee charters, expense policies, and financial-information rights. If a lawyer has no meaningful vote, cannot inspect the economics, receives fixed compensation, bears selected costs, and can be removed through the same process as an employee, the firm needs more than a title to explain why a different legal status follows. The answer may exist. It must exist in substance.

The tax rule raises the stakes without resolving the threshold

Federal tax treatment makes the classification consequential. IRS guidance has long stated that bona fide members of a partnership are not employees of that partnership for federal employment-tax purposes. A partner devoting time and energy to the business is generally treated as self-employed rather than as an employee. That can change withholding, payroll taxes, benefit treatment, estimated payments, and the reporting forms a lawyer receives.

The important phrase is bona fide. The rule describes the consequences of genuine partner status; it does not make every recipient of a Schedule K-1 a genuine partner for every legal purpose. Tax reporting, entity law, wage law, and antidiscrimination statutes can ask related but nonidentical questions. A firm should not assume that a tax form settles an employment-status dispute any more than a business card settles a tax question.

Garland's complaint alleged that her effective compensation fell when the firm began treating her as a partner and allocating expenses to her, without a corresponding change in work, reporting structure, client interaction, or access to equity profits. Those allegations remain allegations. But they identify the economic suspicion that gives these cases force: a promotion should not operate primarily as a transfer of employer costs while leaving authority and upside where they were.

Prestige can conceal a cost allocation

Partnership remains the central status prize in many firms. It signals permanence to clients, validates years of work, improves recruiting, and can strengthen a lawyer's position in the lateral market. That makes the title unusually capable of softening scrutiny. A lawyer may accept unfamiliar tax treatment, narrower benefits, capital obligations, unreimbursed expenses, or greater performance risk because the change is presented as advancement.

The firm also receives something of value. A larger partner tier can make the organization appear deeper and more senior. It can distribute business-development duties and client responsibility. Depending on the structure, it can convert certain employment costs into obligations borne by the lawyer. None of those results is automatically improper. Together, they mean the economics should be stated plainly rather than hidden inside the emotional importance of promotion.

The practical question for a candidate is not merely whether the title says partner. It is what changes the next day. Does compensation become a share of profits or remain a salary by another name? Is there a capital account? Which taxes and benefits move? What expenses become personal? What financial information is available? Who can terminate the relationship and by what vote? Which decisions can the lawyer influence? What liabilities attach? A clear answer protects both sides because it makes the bargain legible before a dispute converts symbolism into evidence.

Firms should audit the gap between ceremony and documents

A sensible review starts with consistency. The offer letter, partnership agreement, tax treatment, benefits administration, website, internal policies, compensation system, and actual governance should describe the same relationship or explain why they differ. Human resources, finance, tax advisers, firm counsel, and the partnership committee should not each be operating from a separate definition of partner.

Next comes substance. Identify who owns an interest, who contributes capital, who votes, who receives financial statements, who shares residual profits and losses, who bears business expenses, who sets compensation, who supervises work, and who can end the relationship. Map those facts to each jurisdiction and each legal regime that matters. A conclusion reached for federal tax purposes should not be copied mechanically into a California wage analysis or an employment-discrimination count.

Finally, explain the economics before promotion. The firm should be able to show a lawyer, in dollars and governance rights, what will change. A title whose financial consequences require forensic reconstruction is not an effective retention tool. It is deferred conflict.

The settlement leaves the profession with the harder question

Garland v. Duane Morris may close without deciding whether the challenged lawyers were employees, partners, or something the firm's tiered structure made harder to name. That is normal for settlement. It also means nobody should turn the agreement into a verdict against Duane Morris or a safe harbor for other firms.

The more useful conclusion is narrower. Partnership is not a ceremonial word when it reallocates taxes, benefits, expenses, authority, and risk. Nor is ownership a marketing word that appears automatically when partner reaches a biography. If a firm wants the commercial advantages of a broad partnership tier, it should be prepared to describe the legal and economic substance of that tier without relying on the title itself.

A promotion can be real without conferring equity. But when the prestige moves to the lawyer and the control and profits stay with someone else, the firm should say exactly what has been promoted. The law may eventually ask the same question with less sentiment.

This article analyzes a reported settlement, allegations, a pleading-stage order, and general legal principles. Duane Morris denied wrongdoing. The agreement does not establish liability, and worker, partner, and tax status depend on the governing law and specific facts.