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Posted on October 22nd 2016 in Legal Articles

Employee vs. partner decision relevant across industries

In upholding a Canadian law firm’s right to require that its equity partners retire at a certain age, the Supreme Court of Canada has clarified the need for detailed partnership agreements, says Toronto civil and commercial litigator Patrick Summers.

In McCormick v. Fasken Martineau DuMoulin LLP, the Supreme Court has said Vancouver lawyer John Michael McCormick cannot proceed with his age discrimination case before the British Columbia Human Rights Tribunal.

McCormick began working with the firm in 1970 and became an equity partner in 1979. He turned 65 in March 2010 and, following a partnership agreement to which all lawyers were subject, was due to retire on Jan. 31, 2011. But McCormick and the firm were unable to reach an agreement that would allow him to work past his retirement age, and in December 2009, McCormick commenced a proceeding with the British Columbia Human Rights Tribunal alleging the firm had discriminated against him based on his age.

The Supreme Court’s 7-0 decision upholds a 2012 ruling by the B.C. Court of Appeal, which said a law firm partner is an employer and not an employee, and therefore not subject to the province’s human rights legislation, the Financial Post reports.

“It’s relevant, certainly to all types of partnerships,” Summers, partner with Birenbaum Steinberg Landau Savin & Colraine, says of the ruling. “Really, it’s a distinction between being an employee and being an owner, and in that case, the Supreme Court has decided that where you’re an owner, at least under the British Columbia code, you’re not covered by the human rights legislation.

“There is a distinction between an owner and an employee, sometimes it becomes a bit blurred in terms of large law firms, or large partnerships of any type, because there are partners that have a lot of power and there are partners that don’t have so much power,” says Summers.

“And I think the Supreme Court seemed to leave open the door that if there was a partner that had very little control or power, that perhaps they might be considered an employee. So there’s a little wedge that was put in there that possibly, it doesn’t apply to all partners if they’ve agreed to a mandatory retirement.”

The ruling “clarifies the status quo,” adds Summers.

“Partnership agreements should be drafted in such a way as to make clear whether the employer wants mandatory retirement – and obviously, the clearer these agreements are, the better.”