John McCormick was an equity partner of Fasken Martineau
DuMoulin LLP (the “Partnership”) for more than 30 years.
As he approached his 65th
birthday, Mr. McCormick brought a human rights claim against the Partnership
alleging that the mandatory retirement provision in the firm’s Partnership
Agreement constituted age discrimination contrary to the British Columbia Human Rights Code
Mr. McCormick’s claim raised the question:
is an equity partner also an employee?
In McCormick v. Fasken Martineau DuMoulin LLP, the Supreme Court found that no
employment relationship existed between Mr. McCormick and the Partnership under
the Code. The Court reviewed the different tests applied
by courts and tribunals when assessing the employment status of a worker,
including the Ontario Labour Relations Board’s seven-factor test. The consistent themes in such tests are control
and dependency; therefore, the Supreme Court created the simplified,
It was clear that the Partnership did not have “genuine
control” over Mr. McCormick in the significant decisions affecting the
workplace, as evidenced by some of the following rights, powers and privileges
he enjoyed as an equity partner:
- The right to participate in the management of
- The right not to be subject to discipline or
- The right, on leaving the firm, to his share of
the firm’s capital account;
- The right to only be expelled from partnership
by a special resolution passed by a meeting of all equity partners (arguably
giving him tenure);
- The other partners owed Mr. McCormick a duty to
render accounts; and
- The right to share in the profits and losses of
the partnership, and the distribution of profits as determined by internal
Lessons for Professional
While this case deals specifically with a law firm, it is
equally applicable to partnerships in accounting, engineering, and other
professional firms. Although it is unlikely
that an equity partner would be considered an employee under human rights
legislation, the Supreme Court noted that such a finding may be justified in a
situation “where the powers, rights and protections normally associated with a
partnership were greatly diminished.”
The Supreme Court noted that while there are similarities in
the different statutory schemes dealing with employment, the determination of
whether an employment relationship exists must always be assessed in the
context of the particular scheme being scrutinized.
More generally, the Supreme Court’s decision signals a shift
away from the lengthy ‘formulaic tests’ applied by courts and tribunals when
assessing the employment status of a worker.
The Court stated that while the indicia
set out in such tests may be helpful, they should not be applied formulaically.
The essence of the “control/dependency test” is
to consider whether the worker is actually subject to the control of others and
dependent on them.