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Forced retirement for partners

How the SCC's McCormick ruling will have an impact on existing partnership agreements.

old man walking

The Supreme Court of Canada, in a unanimous decision, dismissed the appeal in McCormick v Fasken Martineau DuMoulin LLP, thereby upholding the mandatory retirement rule for Fasken partners who reach the age of 65. Gillian Hnatiw, a partner at Lerners LLP in Toronto answered National’s questions about the ruling.

National: What is the impact of this decision on existing partnership agreements with mandatory retirement?

Gillian Hnatiw: For most equity partnership agreements, the decision will be read as an endorsement of the status quo.  While I anticipate that partnerships across the country will scrutinize the decision and consider its application to their own unique circumstances, it is unlikely to result in the elimination of existing mandatory retirement policies.  To the contrary, partnerships who have been watching this case while contemplating the adoption of a similar mandatory retirement policy will likely feel they are at liberty to do so.

N: Why do some firms have mandatory retirement clauses and others don’t?

GH: As the Supreme Court observes, a partnership is at its heart “an entrepreneurial relationship among individuals agreeing to do business together.”  The policies that are adopted by any given partnership will be tailored to the unique best interests of that partnership.  In some firms, particularly the larger national and international ones, mandatory retirement policies are adopted to ensure the regenerative turnover of equity partnership shares.  In other, often smaller partnerships, retirement issues are considered on a case-by-case basis to enable the firm to adjust to its business realities at the time.  Although most firms engage in succession planning in some form, it will not be in the best interest of every partnership to adopt a ‘one size fits all’ policy on retirement.

N: Is the impact of the decision different based on size of firm (large vs. small)?

GH: Faskens is a large, international partnership with a multi-layer management structure and Mr. McCormick was one of 260 equity partners.  Nonetheless, the court found that he was in “control of, rather than subject to, decisions about workplace conditions.”  Given the court’s findings in the context of this large firm, the decision will apply with equal or even greater weight to most smaller partnerships as well.

N: The decision is an interpretation of the law in BC. Will it have an impact on the rest of Canada?

GH: Yes. Writing for a unanimous court, Justice Abella articulates a very high level “control/dependency test” that is likely to be applied by human rights tribunals across the country.  The test can be used to determine whether an employment relationship exists in many different contexts, not just partnerships.

N: Now that the SCC has determined that the Human Rights Code doesn’t apply to Mr. McCormick’s complaint about age discrimination, what are the implications for discrimination on other grounds?

GH: The key aspect of the court’s decision is that, as an equity partner, Mr. McCormick was not in an employment relationship with his firm.  Hence, the Code did not apply to him in these circumstances and his complaint could not proceed.  If he is not an employee, then he cannot allege discrimination in employment on any of the grounds articulated by the Code.