SCC Upholds Mandatory Retirement for Equity Partners

The Supreme Court of Canada has upheld a mandatory retirement provision in the partnership agreement of a major national law firm.  The provision requires equity partners to ‘retire’ and divest themselves of all ownership shares when they turn 65, but allows for continued practise thereafter as either non-equity partners or employees of the firm.

The complaint was brought before the BC Human Rights Tribunal by a 64 year-old equity partner of the law firm. He argued that the mandatory retirement provision was discrimination in employment based on age contrary to the BC Human Rights Code. The law firm challenged the Tribunal’s jurisdiction on the grounds that, as an equity partner, the complainant was not in an employment relationship. The Tribunal dismissed the challenge, finding that there was an employment relationship to which the Code applied. The BC Supreme Court dismissed the law firm’s application for judicial review. but the Court of Appeal granted the appeal, based on its conclusion that an equity partner is not in an employment relationship governed by the Code.

The SCC dismissed the complainant’s appeal on the basis that he had no employment relationship with the partnership and the Tribunal had no jurisdiction over his relationship with the partnership. While reiterating that the definition of “employment” under the Code attracted a “generous interpretation”, the SCC clarified that deciding who is in an employment relationship requires an examination of both the control exercised by the employer and the corresponding dependency of the worker. Key to the SCC’s conclusion that the complainant was not an employee was its determination that there was no genuine control by the law firm over his significant workplace decisions. Indeed, as an equity partner, the complainant controlled the firm, rather than the other way around.

The SCC left the door open for other types of partners (often called ‘income’ or ‘regular’ partners) whose significant workplace decisions are genuinely controlled by the partnership. Such partners might be able to argue that they are employees for purposes of the Code, should they become subject to any form of discrimination in employment. The SCC also pointed to another potential avenue for a partner to claim recourse for discrimination, in the duty to act “with the utmost fairness and good faith towards the other members of the firm in the business of the firm”, mandated by the BC Partnership Act.

John Michael McCormick v. Fasken Martineau Dumoulin LLP