BC Court of Appeal overturns finding that partners in law firms are "employees" under human rights law
The British Columbia Court of Appeal recently released a judgment which overturned a British Columbia Human Rights Tribunal decision which had held that partners in a law firm could be treated as employees for the purpose of human rights protection.
The case involved an “equity” partner, Michael McCormick, in the Vancouver office of the law firm of Fasken Martineau Dumoulin LLP (“Fasken”). Fasken operates as a limited liability partnership, registered under the Partnership Act. All of Fasken’s equity partners, including Mr. McCormick, are subject to a partnership agreement which includes a provision requiring partners to retire at age 65.
The Tribunal decision, upheld by the British Columbia Supreme Court, held that Mr. McCormick was an employee for the purpose of human rights law, even though he was not one for the purpose of common law or other statutes.
The Tribunal pointed to a number of factors in finding that Mr. McCormick was an employee. This included the fact that Fasken gained a benefit from Mr. McCormick who was “utilized” by the partnership to provide legal services to its clients. The Tribunal further found it relevant that the partnership had what it assessed as significant control over Mr. McCormick, including requiring him to use certain forms, specifying the kinds of clients which he could act for, as well as requiring him to reject work if it did not serve the long term interests of the firm. The Tribunal also found significant that the firm could change Mr. McCormick’s compensation structure at any point.
Finally, and perhaps most significantly, the Tribunal relied on the principle that human rights legislation must be interpreted in a broad, liberal and purposive manner and accordingly found that the term “employee” should be interpreted much more broadly in this context.
The Court of Appeal reversed the decision of the Tribunal. Specifically, the Court of Appeal found that, even though partners were subject to management, this did not change the fact that the business is carried out in common. The Court of Appeal went on to state that the relationship between Fasken and Mr. McCormick did not provide the requisite two separate “persons” necessary to find an employer-employee relationship. Rather, the court stated the following with respect to partners in a law firm partnership:
“… the Relationship among them cannot be one of employer and employee, as they are all equal in their rights and obligations with respect to the business of the firm.”
The Court of Appeal further pointed to the fact that the partners which exercise management responsibilities do not employ the partners during the time in which they are in control.
The Court of Appeal also rejected Mr. McCormick’s argument that the partnership should be viewed as an employer as it was in the best position to remedy any undesirable effects of a workplace policy. In dismissing this argument the Court of Appeal pointed out that, unless forced to do so by a tribunal or a court, that any policy change would require a majority or two-thirds approval of the partnership.
What this means for employers
This decision is significant because it demonstrates the ongoing battle regarding the scope of protection under human rights legislation. While the Court of Appeal in this case sided with the partnership, it is clear that human rights tribunals are willing to stretch the definition of an employee so to include as many individuals as possible under the umbrella of human rights protection. The case however makes it clear that, while recognizing the importance of human rights protection, there must be clear limits where no employment relationship is found.