There is about to be a torrent of new litigation, the advent of
an entire new area of law. And as a prelude to that revelation, the
Supreme Court of Canada just released a decision permitting the
B.C. branch of Faskens to force its partner, John McCormick, to
retire at age 65.
The ensuing press reports universally declared that Canadian
partnerships could continue to enforce mandatory retirement among
partners. But what the media failed to report is that the Faskens
decision is limited to British Columbia and that mandatory
retirement of partners in Ontario, and several other provinces,
remains illegal because of the different language of the Human
Rights Codes across the provinces.
Any partner in Ontario forced out of their firm because of age
has a viable case before the Human Rights Tribunal, which would
include reinstatement into the partnership as well as other forms
But that is the least litigation-expanding aspect of the
Justice Abella of the Supreme Court noted that partnerships
throughout Canada have a fiduciary relationship, one of utmost good
faith, to each of their partners.
The implications of that will turn partnership relationships
upside down with every potential conflictual aspect of the
relationship now open to litigation.
Income and termination are among the most important of these.
Generally a management committee of a professional partnership
determines the annual income of each of its partners. But,
let's face it, fixing remuneration is a partly political game
— who is in favour, who is seen as an up-and-comer, who has
the support of those in power, who helped them get elected to their
roles, who antagonized who in the preceding year or who is in a
better political position to make a naked grab for power.
None of that would survive the court's test for utmost good
faith. And how much of the partnerships' criteria —
subjective as much of its determination is in assessing
contribution and income — would survive a judicial challenge,
let alone a challenge to the application of that criteria?
If challenged, the partnership would have to disclose all
documentation and information related to the decisions respecting
each partner and their assigned incomes, all information which is
kept entirely confidential by most partnerships. Assuming the
partner was reasonable in his or her demands, how many cases would
a partnership ever permit to get to trial?
Partnerships cannot expel its partners unless the partnership
agreement permits it. As Justice Abella noted, that is why
partnership agreements have such high thresholds for
In light of this decision, those criteria will be interpreted
strictly in favour of the expelled partner because of the utmost
good faith partnerships must demonstrate toward their partners.
The partnership should be prepared to prove that the expelled
partner was the worst, based on its objectively reasonable criteria
(and subject to challenge), to be selected for expulsion. And if
the clauses are as amorphous as, for instance, expulsions for good
reason that reason must be demonstrably justified. Dismissals for
lack of work likely won't be sufficient. The court may find the
partnerships' fiduciary duty to require all of the partners to
accept less income before expelling any of them.
Finally, and most significantly, the damages from such cases
will be vast. If the test for expulsion isn't met, since
partners can't be expelled otherwise, the damages could be 10
or 20 years pay, rather than 24 months severance — the usual
limitation for an employee.
In acting for partners, I have argued that they are employees.
Interestingly, the Supreme Court agreed, finding that, if the
relationship is one of dependency, a partner is really an employee
at law. Now since the potential for damages is so much greater,
partners will be motivated to argue that they are really partners
and should not have been expelled.
A new world of litigation indeed. How will professional
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Unfortunately, reasonable accommodation for employees in the workplace continues to be the source of significant litigation and even today we continue to see outrageous examples of employers behaving badly.
We are now beginning to see reported cases involving charges and subsequent fines laid against employers for failing to provide information, instruction and supervision to protect a worker from workplace violence.
On October 13, 2016, the Supreme Court of Canada denied leave to appeal an Ontario Court of Appeal decision which ordered an employer to pay a former employee 37 months of salary and benefits following termination.
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