In McCormick v Fasken Martineau DuMoulin LLP, the Supreme Court of Canada ruled that a partner in a partnership will generally not be considered an employee falling under the protection of human rights legislation, unless the substance of a partnership agreement gives the partner little control and influence over their working conditions and financial benefits.
Mr. McCormick was an equity partner at the law firm Fasken Martineau DuMoulin LLP (“Fasken”). Fasken’s partnership agreement included a mandatory retirement provision which required equity partners to retire as equity partners and divest their ownership shares the year before they turned 65. When he was 64, Mr. McCormick brought an application before the British Columbia Human Rights Tribunal challenging this provision as constituting age discrimination in employment, contrary to the British Columbia Human Rights Code (“Code”). Fasken sought to dismiss the application, arguing that the Code does not apply as an equity partner is not in an employment relationship with the firm.
Employment relationship falling under the protection of human rights legislation
In determining what constitutes an employment relationship, the Supreme Court considered the purposes of the Code. The Code seeks to prevent arbitrary disadvantage or exclusion based on enumerated grounds by prohibiting discrimination in specific contexts. Thus, “employment” must be viewed in light of the legislation’s protective purposes.
When an employer has great control over the work life of a worker and there is a corresponding dependency, then a worker is vulnerable economically, socially and psychologically. For the purposes of the Code, the extent of the control/dependency determines whether the relationship constitutes a workplace relationship that falls under the protection of the legislation. There are two questions to consider:
- How much control does the employer have over the worker’s working conditions and remuneration (and other decisions that critically affect the worker’s working life)?
- To what extent does the worker have an influential say in the critical decisions that affect their working life?
Partnership: an employment relationship?
With respect to partnerships, the Court indicated that a partner in a partnership generally exercises control and influence over the critical decisions of their working life; the partner is collectively the employer in the partnership, and not an employee. Therefore, an equity partner, who has part ownership of the firm, will likely not be considered to be in an employment relationship with the partnership that falls under the protection of the Code.
As a result, the Court ruled that Mr. McCormick was not an “employee” protected by the Code. Though he was subject to administrative rules, such as management and compensation committees, these rules did not change the essential nature of the equity partnership relationship. Fasken’s partnership had no genuine control over the significant decisions affecting Mr. McCormick’s working life; instead, Mr. McCormick was part of the partnership controlling the firm.
Lessons for Employers
Partners in partnerships will generally not be protected by human rights legislations, unless the substance of the partnership agreement erodes the partner’s control and increases their dependency. In particular, policies designed to benefit all partners approved by the partners, such as the mandatory retirement policy at Fasken’s, will generally be upheld by the courts. However, duties of utmost fairness and good faith mean that partnerships may still be liable for arbitrary disadvantage among partners.
Lessons for Employees
Employees who are partners may not find protection from discrimination through human rights legislation. However, a partner may still be considered an employee protected by human rights legislation if the typical powers, rights and protections that give a partner control (and reduces dependency) are not present. A partner may also find recourse if the actions of the rest of the partnership violates the duty of utmost fairness and good faith.
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