Client Update: Professional Partnerships Breathe Easier

This morning the Supreme Court of Canada released its much awaited decision in McCormick v. Fasken Martineau DuMoulin, holding that most legal (and other professional) partnerships are not subject to Human Rights obligations to partners, because there is no “employment relationship” between a firm and its partners. In the Fasken’s case, the issue was the partnership provision which required an equity partner to retire at age 65, a provision common in most professional partnerships. While partners were subject to various policies and administrative rules, the Supreme Court formulated the analysis as one of control and dependency:

…the test is who is responsible for determining working conditions and financial benefits and to what extent does a worker have an influential say in those determinations?

The Court very strongly expressed the view that in most partnerships equity partners have a right to participate meaningfully in the decision making process. The partner in question was “part of the group that controlled the partnership, not a person vulnerable to its control.”

The Supreme Court noted that in some jurisdictions – most notably the United Kingdom, Australia and New Zealand – there are specific statutory provisions which make employment legislation (including Human Rights) applicable to partnerships. The Court noted also the duty of fairness and good faith specifically set out in the B.C. Partnership Act but then added that it would be difficult to see how that duty could preclude a partnership from instituting a mandatory retirement policy “designed to benefit all partners by ensuring the regenerative turnover of partnership shares”.

One final note: professional partnerships must still take care that not too many energized senior partners “jump ship” late in their careers.