Partner not an employee: B.C. court

Law firm partner claimed firm discriminated against him based on age
By Arthur Zeilikman
|Canadian HR Reporter|Last Updated: 09/25/2012

In a unanimous decision, the British Columbia Court of Appeal has ruled a partner is not an employee for the purposes of the province’s Human Rights Code.

John Michael McCormick began his legal career at Fasken Martineau DuMoulin (now Fasken Martineau) in 1970 and became an equity partner in 1979. He turned 65 in March 2010 and, following a partnership agreement to which all lawyers were subject, was due to retire on Jan. 31, 2011, the financial year-end of the firm.

As an equity partner, McCormick had an ownership interest in the firm, a share in the profits of the firm and was entitled to a distributive share of the assets of the firm on its dissolution. Where firm debts were not insured, he was personally liable pursuant to the firm’s partnership agreement and the B.C. Partnership Act. McCormick was also entitled to various management privileges, none of which were available to firm employees.

McCormick and the firm were unable to reach an agreement that would allow him to work past his retirement age.

So, in December 2009, McCormick commenced a proceeding with the British Columbia Human Rights Tribunal alleging the firm had discriminated against him based on his age.

At the hearing, the tribunal refused to accept the firm’s argument that the tribunal was without jurisdiction to hear this matter. The firm then brought an application for judicial review to set the tribunal’s decision aside. However, the chambers judge agreed with the tribunal’s decision.

The matter was appealed to the British Columbia Court of Appeal. In reviewing the decision, the appeal court unanimously set the tribunal’s decision aside and allowed the firm’s appeal with costs.

True partners cannot be employees

Speaking for the court, Justice Risa Levine elaborated on the meaning of the law of partnerships in Canada, stating that unlike a corporation, a partnership is not a separate legal entity — it is not separate from the partners who are merely its members.

Levine pronounced the long-standing proposition that “a partner cannot be an employee of the partnership of which he or she is a member, because he or she cannot employ him or herself.”

This is not to say a partnership cannot be an employer — firms often employ staff and associate lawyers. The point is, however, that true partners cannot be employees.

Furthermore, notwithstanding the chamber judge’s position that a partner may sue the partnership and vice versa, pursuant to the B.C. Partnership Act, Levine characterized this position as a “considerable over-reading” of the section.

Finally, the foregoing common law principles cannot be overridden by a broad, liberal and purposive interpretation of the B.C. Human Rights Code, ruled Levine.

So, as things stand right now, B.C. business partners do not benefit from the protection of human rights legislation. However, it’s possible this decision will be appealed to the Supreme Court of Canada.

Differences in Ontario

It is likely, however, that in Ontario the decision would have turned out differently. Section 3 of the Ontario Human Rights Code prohibits discrimination in contractual transactions. The code states that persons having a legal capacity have a right to contract on equal terms without discrimination because of age.

Interestingly, the Ontario Discriminatory Business Practices Act (DBPA) — a statute meant to eliminate discriminatory practices in business — does not list age as a ground pursuant to which discrimination can be alleged.

Instead, the act states its purpose is “to prevent discrimination in Ontario on the ground of race, creed, colour, nationality, ancestry, place of origin, sex or geographical location of persons employed in or engaging in business.”

Ironically, in the 1985 decision of Makkar v. Scarborough (City), the then Ontario Supreme Court ruled discrimination in employment has to be addressed not through the DBPA but through the relevant provisions of the Human Rights Code — a statute commonly used in the employment or residential tenancy contexts, but one that is also likely to provide some protection to non-employees such as McCormick.

Arthur Zeilikman is a barrister and solicitor at Zeilikman Law in Toronto. He can be reached at (416) 477-5540 or visit www.zeilikmanlaw.com for more information.

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