For Employers

Partnership Agreements

Those who have an interest in a partnership should take note of Fasken Martineau DuMoulin LLP v. British Columbia (Human Rights Tribunal), 2012 BCCA 313, in which the British Columbia Court of Appeal considered a Human Rights Tribunal decision about whether partners are considered employees.

The case involved John Michael McCormick, who was a partner at the law firm of Fasken Martineau DuMoulin LLP. As a partner, Mr. McCormick had to sign a partnership agreement, which gave him an ownership interest in the firm, and entitled him to a share of the firm’s profits. Mr. McCormick turned 65 in March, 2010, and pursuant to a partnership agreement, was obligated to retire on January 31, 2011. Mr. McCormick wished to continue to work for Fasken Martineau, but the firm and Mr. McCormick were unable to come to an agreement that would allow him to continue to practice.  Mr. McCormick then filed a complaint with the Human Rights Tribunal claiming that he was discriminated against on the basis of age in his employment.

The Human Rights Tribunal found that it had jurisdiction and that Mr. McCormick was discriminated against in his employment.

Fasken Martineau sought a judicial review of this decision in the Supreme Court of British Columbia arguing that the Human Rights Tribunal did not have jurisdiction as Mr. McCormick was not an employee.  A judicial review is not the same as an appeal. A judicial review considers the procedural fairness and correctness of the decision Human Rights Tribunal. The judge ruled that the Human Rights Tribunal had jurisdiction to consider the matter and that Mr. McCormick was discriminated against in his employment.

Fasken Martineau appealed further to the British Columbia Court of Appeal. The Court of Appeal ruled that partners are not employees of a partnership in which the person is a partner. In making its decision, the Court of Appeal ruled that a person cannot be their own employee. As such, the Human Rights Tribunal was without jurisdiction to consider the matter.

The McCormick case concerned the Human Rights Code. It is important to note that it’s possible that for a person to be an employee for the purposes of one piece of legislation, but not for another. That being said, courts and tribunals often use similar tests when determining whether an individual is an employee for various pieces of legislation.

In practice, particularly in mid to larger sized partnerships, some partners take on a role that is much more similar to that of an employee than a partner. However, this decision means that the rights available to a partner (an owner of the business) versus the rights of a non-owning employee upon being forced or required to leave the business can be quite different. While employees may be able to make human rights complaints and claim severance, it appears that partners are left without such remedies.

To deal with such a scenario, individuals should take great care when entering into a partnership. It often makes sense for partners to have a partnership agreement to minimize uncertainty. Partners should review their partnership agreements in detail to make sure that they are completely satisfied with the terms as it may not be possible to change those terms later on.

Are you concerned about claims being advanced by a former partner? Or are you considering ousting a partner pursuant to a partnership agreement? If so, we encourage you to get legal advice regarding that matter. Contact us today for a consultation.

This blog is produced by Waterstone Law Group LLP. This blog is intended for information purposes only and is not offered as legal advice for a specific claim. Subscription to or use of this site does not establish a solicitor – client relationship between the user and Waterstone Law Group LLP or any of the individual contributors. For advice relating to your employment law claim, please contact us to arrange for a consultation.

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