Can a Partner Also be an Employee?

Supreme Court of Canada grants Leave to Appeal in McCormick v. Fasken Martineau Dumoulin LLP.

Background

Until 2009, Michael McCormick was an equity partner at the law firm Fasken Martineau DuMoulin LLP. When he reached 65 years of age in 2009, McCormick was advised by the firm that he was obliged to withdraw from the firm as a partner – mandatory retirement at age 65 was a condition of the partnership agreement McCormick signed with the firm. McCormick filed a complaint with the British Columbia Human Rights Tribunal, on the basis that the obligation to withdraw amounted to employment discrimination on the basis of age.

The case has implications for any organisation structured as a partnership and for the mandatory retirement policies of all employers. The case may also clarify a more fundamental tension – the nature of the employment relationship at its core.

History in the Courts

Madam Justice Bruce of the BC Supreme Court found that the human rights principles “should not be determined by reference to narrow legal principles” such as those provided by partnership and contract law. She noted that as an individual equity partner, McCormick had very little control over his work life, remuneration and work product. Bruce J. agreed with the Human Rights Tribunal, finding that McCormick was an employee for the purposes of the Human Rights Code.

A unanimous Court of Appeal disagreed, finding that even though the Human Rights Code deserves a “broad, liberal, and purposive interpretation”, the language of the Partnership Act is clear, and that, “a partnership is not a separate entity from its partners, and a partner cannot be an employee of, or employed by, a partnership of which he is a member.”

On March 7, 2013, the Supreme Court of Canada granted McCormick leave to appeal.

Lessons for Employers

The concept of employment is fact specific and companies should be careful when engaging individuals other than through an employment relationship to provide services. Key takeaways are:

  • Every accounting, architecture, engineering, law, and other organisation structured as a partnership – either by choice or by professional regulation – should examine internal policies relating to non-governing partners, or risk future exposure to potential Human Rights complaints.
  • Mandatory retirement is unlawful in most Canadian jurisdictions and policies that discriminate based on age should be examined closely, even when those policies do not apply directly to the traditional concept of the employee.

Allowing leave gives the SCC the opportunity to clarify whether an individual can be an employee for one purpose, without necessarily being an employee for all purposes. If McCormick could be a partner for tax purposes, but an employee for human rights purposes, then other relationships (such as consultants and other independent contractors) might be equally subject to dual characterization.