Lawyer Unsuccessful in Discrimination Claim Against Law Firm

The decision of Fasken Martineau DuMoulin LLP v British Columbia (Human Rights Tribunal), 2012 BCCA 313, previously discussed on this site, has now made its way to the Supreme Court. Canada’s highest court has confirmed the result that Mr. McCormick, an equity partner at Fasken, could not succeed in his claim of age discrimination against the firm as a result of its mandatory retirement policy: McCormick v Fasken Martineau DuMoulin LLP, 2014 SCC 39.

Since 1980, Mr. McCormick had been subject to the firm’s mandatory retirement provision, which called for equity partners to retire and to divest their ownership interest in the firm by the time they reached the age of 65. In the year before he turned 65, Mr. McCormick filed a claim under the B.C. Human Rights Code, RSBC 1996, c 210 [the Code], alleging that the firm’s policy amounted to discrimination based on age. While age is an enumerated ground of discrimination in the Code, in order for it to apply, and in order for the tribunal to have jurisdiction to hear the case, McCormick’s relationship with the firm had to be one of employment. The Supreme Court ultimately found that the relationship between Mr. McCormick and Fasken was not an employment relationship and therefore the Code did not apply, and could offer no remedy, in this particular situation.

While the SCC’s result was identical to that reached by the B.C. Court of Appeal, the SCC differed in its reasoning and analysis. The intervenors in the latter case included, among others, representatives from the big four accounting firms; but no law firm representatives intervened. This case, nonetheless, is of obvious importance to law firms as both professions use the partnership structure. The outcome of the case had the potential to affect the rights of partners as well as any potential liabilities of the firm.

Substance over Form

A partnership, while often referred to as a firm, does not have separate legal status apart from that of its constituent partners. In this way the partnership differs significantly from a corporation, which in law is treated as a separate legal person. This characteristic of partnerships weighed heavily in the Court of Appeal’s analysis, and it noted that, as a matter of principal, “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” (para 37). Thus legal categories played a key role in the court’s analysis. The Tribunal and the Chamber’s judge each looked at several factors in assessing whether there existed an employment relationship. However, the B.C. Court of Appeal’s reasoning seems to suggest that before those factors can be assessed, the parties, Mr. McCormick and Fasken, must first be considered separate legal persons, which they are not.

The significance as well as the novelty of the Supreme Court’s decision lies arguably more in its approach to reasoning through the issue than in the final outcome. The Supreme Court’s analysis did not hinge on rigid legal concepts or categories. Instead, it took a substance-over-form approach in determining what constitutes employment, focusing rather on the true nature of the relationship. Essentially, in this decision reality outweighed legality. In assessing the true nature of an employment relationship, the criteria of paramount importance are the control exerted by the employer and the corresponding dependence of the employee. When applying this analytical framework to the facts, Mr. McCormick was not precluded from being categorized as an employee simply as a matter of law. That result arose from a further inquiry into the facts, which revealed the true nature of the relationship. While the Court found many reasons why, on the facts, Mr. McCormick was not controlled by the firm, it is now at least theoretically possible that a person who has the legal status of partner at a firm could be characterized as an employee given particular facts.

Statutory Interpretation

The Supreme Court was clear, however, that the substance-over-form approach to discerning the existence of an employment relationship is to be limited to the context of human rights legislation. Thus context is key. The meaning of the word “employment” was not sought because the term itself has a fixed or essential, intrinsic value. The SCC points out that the jurisprudence has established that in this particular context, the term ought to be interpreted broadly, so much so that “independent contractors, for example, have been found to be employees for purposes of human rights legislation, even though they would not be considered employees in other legal contexts” (para 22). Also of importance is the purpose of the legislation. Because the purpose of the Code is to protect those who are vulnerable, a broad interpretation is called for to ensure that as many people as possible are brought under its protective sphere.

The Supreme Court of Canada’s approach to statutory interpretation seems to differ from that of the Court of Appeal. The BCCA acknowledges that human rights legislation calls for a more expansive definition of employment such that it may extend employee–employer relationships to those that would not be so categorized under the common law. But the court maintains that stretching the term to include partners stretches the term too far. In other words, it will not interpret a statute in a way that reclassifies bona fide legal relationships. The Supreme Court’s focus on substance circumvents the issue of partnerships’ lack of separate legal status and effectively transcends a purely formulaic analysis.

Discrimination in the Workplace

While the legal issue in this case turned on the definition of employment, the underlying issue of alleged discrimination in a partnership agreement is illuminating because it reminds us that discrimination may occur in the workplace outside of an employer–employee relationship. The SCC points to U.K. legislation enacted for the purpose of protecting partners from discrimination given that they are not generally covered under legislation prohibiting employment-related discrimination. Canada, however does not appear to have comparable partnership legislation. To conclude, the SCC suggests that the duty of good faith that partners owe to each other under the Partnership Act, RSBC 1996, c 348, could potentially provide a remedy. Whether the duty of good faith is on point is debatable. As opposed to the clearly enumerated, prohibited grounds of discrimination under human rights legislation, the concept of good faith is broad and abstract. As a result, it is likely to be conceptualized differently by different people. If it were to apply to discrimination in the context of partnerships, it may be best to establish some benchmarks or standards rather than to be left to the discretion of a particular judge.