The Supreme Court of Canada has established the scope of the
definition of "employee" in human rights legislation,
holding that an equity partner in a law firm does not amount to an
employee for the purposes of the British Columbia Human Rights
Code, R.S.B.C. 1996, c.210 (the "Code"). This case will
have implications for equity partners in a range of professional
organizations, including law and accounting firms.
In McCormick v. Fasken Martineau DuMoulin LLP, 2014 SCC 39, per
Abella J., the plaintiff had been an equity partner at the
defendant law firm since 1979. The firm had a Partnership Agreement
which stated that equity partners had to divest their ownership
shares in the partnership at the end of the year in which they
turned 65 years old. A partner could make individual arrangements
at that point to continue working as an employee or a
"regular" partner. The plaintiff alleged that the
mandatory retirement provision in the Partnership Agreement
amounted to age discrimination under the Code. The law firm applied
to have the claim dismissed on the grounds that an equity
partnership was not the type of employment relationship protected
by the Code. At issue was how to characterize the lawyer's
relationship with the law firm in order to determine if the issue
came within the jurisdiction of the Code over employment.
The Court held that the plaintiff's claim ought to be
dismissed on the basis that the lawyer was not in an employment
relationship as defined in the Code.
First, the issue of deciding who was in an employment
relationship under the Code meant examining two aspects of the
relationship, i.e. the control exercised by the employer over
working conditions and remuneration and the corresponding
dependency on the part of the worker. The test is "who is
responsible for determining working conditions and financial
benefits and to what extent does a worker have an inf luential say
in those determinations?". According to the Court, the more
the work life of individuals is controlled, the greater their
dependency and consequently, their economic, social and
psychological vulnerability in the workplace.
The Court then noted that in most cases, partners in a
partnership were not employees of the partnership, but were,
collectively, "the employer". In the instant case, the
lawyer, as an equity partner, had the right to participate in the
management of the partnership and benefitted from other
"control mechanisms", such the right to vote for and
stand for election to the firm's Board. Moreover, other
partners owed a duty to the lawyer to render accounts. The lawyer
also had the right, on leaving the firm, to his share of the
firm's capital account. Accordingly, the lawyer was not working
for the benefit of someone else, but was in a common enterprise
with his partners for profit.
The Court did note that its ruling did not mean that a partner
in a firm could never be an employee under the Code. However, a
partner would only likely be characterized as an employee where the
powers, rights and protections normally associated with a
partnership were greatly diminished.
Moreover, the fact that the lawyer had no remedy under the Code
did not mean that he had no recourse for claims of discrimination.
The duty of a partner to act with the "utmost fairness and
good faith", as set out in the B.C. Partnerships Act, could
form the basis of a claim for discrimination against the
partnership. Having said that, the Court held that it was
"difficult to see how the duty of good faith would preclude a
partnership from instituting an equity divestment policy designed
to benefit all partners".
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