SUPREME
COURT OF CANADA
Between:
John
Michael McCormick
Appellant
and
Fasken
Martineau DuMoulin LLP
Respondent
- and -
Alberta
Human Rights Commission, British Columbia Human Rights Tribunal,
Ernst
& Young LLP, KPMG LLP, Deloitte LLP, PricewaterhouseCoopers LLP,
BDO
Canada LLP, Grant Thornton LLP, Young Bar Association of Montreal,
Ontario
Human Rights Commission and Canadian Human Rights Commission
Interveners
Coram: McLachlin C.J. and LeBel, Abella, Rothstein, Cromwell,
Moldaver and Karakatsanis JJ.
Reasons
for Judgment:
(paras. 1 to 49)
|
Abella J. (McLachlin C.J. and LeBel, Rothstein,
Cromwell, Moldaver and Karakatsanis JJ. concurring)
|
mccormick v. fasken martineau dumoulin, 2014 SCC 39, [2014] 2 S.C.R. 108
John Michael McCormick Appellant
v.
Fasken Martineau DuMoulin LLP Respondent
and
Alberta Human Rights Commission,
British Columbia Human Rights Tribunal,
Ernst & Young LLP, KPMG LLP,
Deloitte LLP,
PricewaterhouseCoopers LLP,
BDO Canada LLP, Grant Thornton LLP,
Young Bar Association of Montreal,
Ontario Human Rights Commission and
Canadian Human Rights
Commission Interveners
Indexed as: McCormick v. Fasken Martineau DuMoulin LLP
2014 SCC 39
File No.: 34997.
2013: December 13; 2014: May 22.
Present: McLachlin C.J. and LeBel, Abella, Rothstein, Cromwell, Moldaver
and Karakatsanis JJ.
on appeal from the court
of appeal for british columbia
Human
rights — Discrimination — Employment — Age — Law firm partnership agreement
containing provision relating to retirement at age 65 — Equity partner filing
complaint with Human Rights Tribunal arguing provision constituting age
discrimination in employment — Whether equity partner engaged in “employment
relationship” for purposes of Human Rights Code — Whether complaint comes
within jurisdiction of Human Rights Tribunal — Human Rights Code, R.S.B.C.
1996, c. 210, ss. 1, 13, 27.
M
became an equity partner at his law firm in 1979. An equity partner has an
ownership interest in the firm. In the 1980s, the equity partners voted to
adopt a provision in their Partnership Agreement that required equity partners to
retire as equity partners and divest their ownership shares at the end of the
year in which they turned 65. A partner could make individual arrangements to
continue working as an employee or as a “regular” partner without an equity
stake, but such arrangements are stated in the Agreement to be the exception
rather than the rule. In 2009, when he was 64, M brought a complaint to the
Human Rights Tribunal arguing that this provision constituted age discrimination
in employment, contrary to s. 13(1) of the Human Rights Code, R.S.B.C.
1996, c. 210 (“Code”).
The
law firm applied to have the complaint dismissed on the grounds that M, as an
equity partner, was not in the type of workplace relationship covered by the Code.
The Tribunal concluded that there was an employment relationship. The law
firm’s application for judicial review was dismissed by the B.C. Supreme Court.
The Court of Appeal allowed the appeal, concluding that M, as a partner, was
not in an employment relationship pursuant to the Code.
Held: The appeal should be dismissed.
The Code
is quasi-constitutional legislation that attracts a generous interpretation to
permit the achievement of its broad public purposes. Those purposes include the
prevention of arbitrary disadvantage or exclusion based on enumerated grounds,
so that individuals deemed to be vulnerable by virtue of a group characteristic
can be protected from discrimination. The Code achieves those purposes
by prohibiting discrimination in specific contexts. One of these contexts is
employment.
Deciding
who is in an “employment relationship” for purposes of the Code means
examining how two synergetic aspects function in an employment relationship:
control exercised by an employer over working conditions and remuneration, and
corresponding dependency on the part of a worker. 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
more the work life of individuals is controlled, the greater their dependency
and, consequently, their economic, social and psychological vulnerability in
the workplace.
Control
and dependency are a function not only of whether the worker receives immediate
direction from, or is affected by the decisions of others, but also whether he
or she has the ability to influence decisions that critically affect his or her
working life. The answers to these questions represent the compass for determining
the true nature of the relationship. Ultimately, the key is the degree of
control and the extent to which the worker is subject and subordinate to
someone else’s decision-making over working conditions and remuneration.
Applying
the control/dependency test to this case, in addition to the right to
participate in the management of the partnership, as an equity partner M
benefited from other control mechanisms, including the right to vote for ―
and stand for election to ― the firm’s Board; the duty that the other
partners owed to him to render accounts; the right not to be subject to
discipline or dismissal; the right, on leaving the firm, to his share of the
firm’s capital account; and the protection that he could only be expelled from
the partnership by a special resolution passed by a meeting of all equity
partners and a regional resolution in his region.
As
an equity partner, and based on his ownership, sharing of profits and losses,
and the right to participate in management, M was part of the group that
controlled the partnership, not a person vulnerable to its control, and, for
over 30 years, benefited financially from the retirement of other partners. In
no material way was M structurally or substantively ever in a subordinate
relationship with the other equity partners. It is true that the law firm had
certain administrative rules to which M was subject, but they did not transform
the substance of the relationship into one of subordination or dependency. This
is not to say that a partner in a firm can never be an employee under the Code,
but in the absence of any genuine control of M in the significant decisions
affecting the workplace, there was no employment relationship between him and the
partnership under the provisions of the Code.
The
Tribunal therefore had no jurisdiction over M’s relationship with the
partnership.
Cases Cited
Referred
to: Crane v. British Columbia (Ministry of Health Services) (No. 1),
2005 BCHRT 361, 53 C.H.R.R. D/156, rev’d 2007 BCSC 460, 60 C.H.R.R. D/381; Moore
v. British Columbia (Education), 2012 SCC 61, [2012] 3 S.C.R. 360; British
Columbia (Workers’ Compensation Board) v. Figliola, 2011 SCC 52, [2011] 3
S.C.R. 422; Winnipeg School Division No. 1 v. Craton, [1985] 2 S.C.R.
150; Ontario Human Rights Commission v. Simpsons-Sears Ltd., [1985] 2
S.C.R. 536; Canadian National Railway Co. v. Canada (Canadian Human Rights
Commission), [1987] 1 S.C.R. 1114; Council of Canadians with
Disabilities v. VIA Rail Canada Inc., 2007 SCC 15, [2007] 1 S.C.R. 650; Zurich
Insurance Co. v. Ontario (Human Rights Commission), [1992] 2 S.C.R. 321; National
Bank of Greece (Canada) v. Katsikonouris, [1990] 2 S.C.R. 1029; University
of British Columbia v. Berg, [1993] 2 S.C.R. 353; Canadian Pacific Ltd.
v. Canada (Human Rights Commission), [1991] 1 F.C. 571; Pannu v.
Prestige Cab Ltd. (1986), 73 A.R. 166; Yu v. Shell Canada Ltd., 2004
BCHRT 28, 49 C.H.R.R. D/56; Canada (Attorney General) v. Rosin, [1991] 1
F.C. 391; Mans v. British Columbia Council of Licensed Practical Nurses (1990),
14 C.H.R.R. D/221; International Woodworkers of America v. Atway Transport
Inc., [1989] OLRB Rep. 540; Pointe-Claire (City) v. Quebec (Labour
Court), [1997] 1 S.C.R. 1015; York Condominium Corp., [1977] OLRB Rep.
645; Clackamas Gastroenterology Associates, P. C. v. Wells, 538 U.S. 440
(2003); Backman v. Canada, 2001 SCC 10, [2001] 1 S.C.R. 367; Boyd v. Attorney-General
for British Columbia (1917), 54 S.C.R. 532; Green v. Harnum, 2007
NLCA 57, 269 Nfld. & P.E.I.R. 97; Blue Line Hockey Acquisition Co. v.
Orca Bay Hockey Ltd. Partnership, 2008 BCSC 27, 40 B.L.R. (4th) 83, aff’d
2009 BCCA 34, 52 B.L.R. (4th) 108; Re Davies and Council of the Institute of
Chartered Accountants of Saskatchewan (1985), 19 D.L.R. (4th) 447; Coal
Harbour Properties Partnership v. Liu, 2004 BCCA 283, 48 B.L.R. (3d) 237; Largie
v. TCBA Watson Rice, LLP, 2013 U.S. Dist. LEXIS 117688; Bowers v.
Ophthalmology Group, LLP, 2012 U.S. Dist. LEXIS 118761, rev’d 733 F.3d 647
(2013); Kirleis v. Dickie, McCamey & Chilcote, P.C., 2009 U.S. Dist.
LEXIS 100326; Equal Employment Opportunity Commission v. Sidley Austin Brown
& Wood, 315 F.3d 696 (2002); Ellis v. Joseph Ellis & Co.,
[1905] 1 K.B. 324; Re Thorne and New Brunswick Workmen’s Compensation Board
(1962), 33 D.L.R. (2d) 167, aff’d [1962] S.C.R. viii; Hitchcock v. Sykes
(1914), 49 S.C.R. 403; Cameron v. Julien (1957), 9 D.L.R. (2d)
460; Rochwerg v. Truster (2002), 58 O.R. (3d) 687.
Statutes and Regulations Cited
Administrative Tribunals Act, S.B.C.
2004, c. 45, s. 59.
Age Discrimination Act 2004 (Cth.), No. 68,
s. 21.
Anti-Discrimination Act 1977 (N.S.W.), No.
48, ss. 10A, 27A, 49G.
Anti-Discrimination Act 1991 (Qld.), No.
85, ss. 16 to 18.
Disability Discrimination Act 1992
(Cth.), No. 135, s. 18.
Equal Opportunity Act 1984 (S.A.), ss. 33,
55, 70.
Equal Opportunity Act 1984 (W.A.), ss. 14,
40, 66E.
Equal Opportunity Act 2010 (Vic.), No. 16,
ss. 30, 31.
Equality Act 2010 (U.K.), 2010, c. 15,
s. 44.
Human Rights Act 1993 (N.Z.), 1993, No. 82,
s. 36.
Human Rights Code, R.S.B.C. 1996, c. 210,
ss. 1 “employment”, “person”, 3, 13, 27(1)(a), (c).
Partnership Act, R.S.B.C. 1996, c. 348, ss.
1 “firm”, 2 “partnership”, 22, 27(e), 28, 31, 104.
Partnership Act 1890 (U.K.), 1890, c. 39.
Sex Discrimination Act 1984 (Cth.), No. 4,
s. 17.
Authors Cited
Adams, George W. Canadian Labour Law, 2nd ed. Toronto: Canada
Law Book, 1993 (loose-leaf updated December 2013, release 48).
Arthurs, H. W. “The Dependent Contractor: A Study of the Legal
Problems of Countervailing Power” (1965), 16 U.T.L.J. 89.
Davidov, Guy. “The Three Axes of Employment Relationships: A
Characterization of Workers in Need of Protection” (2002), 52 U.T.L.J.
357.
England, Geoffrey. Individual Employment Law, 2nd ed. Toronto:
Irwin Law, 2008.
Houh, Emily M. S. “Critical Race Realism: Re-Claiming the
Antidiscrimination Principle through the Doctrine of Good Faith in Contract
Law” (2005), 66 U. Pitt. L. Rev. 455.
Lindley & Banks on Partnership, 19th
ed., by Roderick I’Anson Banks. London: Sweet & Maxwell, 2010.
Manitoba. Law Reform Commission. Good Faith and the Individual
Contract of Employment, Report #107. Winnipeg: The Commission, 2001.
Manzer, Alison R. A Practical Guide to Canadian Partnership Law.
Toronto: Canada Law Book, 1994 (loose-leaf updated December 2013, release 20).
Sullivan, Ruth. Sullivan on the Construction of Statutes, 5th
ed. Markham, Ont.: LexisNexis, 2008.
VanDuzer, J. Anthony. The Law of Partnerships and Corporations,
3rd ed. Toronto: Irwin Law, 2009.
APPEAL
from a judgment of the British Columbia Court of Appeal (Finch C.J. and Newbury
and Levine JJ.A.), 2012 BCCA 313, 352 D.L.R. (4th) 294, [2012] 9 W.W.R. 633,
325 B.C.A.C. 216, 34 B.C.L.R. (5th) 160, 100 C.C.E.L. (3d) 196, [2012] B.C.J. No.
1508 (QL), 2012 CarswellBC 2180, setting aside a decision of Bruce J., 2011
BCSC 713, 335 D.L.R. (4th) 450, 93 C.C.E.L. (3d) 314, 71 C.H.R.R. D/280, [2011]
B.C.J. No. 999 (QL), 2011 CarswellBC 1340. Appeal dismissed.
Murray
Tevlin and John Chesko, for the appellant.
Irwin
G. Nathanson, Q.C., and Peter Senkpiel,
for the respondent.
Arman
Mujahid Chak and Audrey Dean, for the
intervener the Alberta Human Rights Commission.
Katherine
Hardie, for the intervener the British Columbia
Human Rights Tribunal.
Peter
H. Griffin and Rory Gillis, for the
interveners Ernst & Young LLP, KPMG LLP, Deloitte LLP,
PricewaterhouseCoopers LLP, BDO Canada LLP and Grant Thornton LLP.
Written
submissions only by Vincent de l’Étoile and Catherine Galardo,
for the intervener the Young Bar Association of Montreal.
Reema
Khawja and Anthony D. Griffin, for the
intervener the Ontario Human Rights Commission.
Philippe
Dufresne and Valerie Phillips, for the
intervener the Canadian Human Rights Commission.
The
judgment of the Court was delivered by
[1]
Abella J. — John Michael McCormick became an equity
partner at Fasken Martineau DuMoulin LLP in 1979. In the 1980s, the equity
partners — those partners with an ownership interest in the firm — voted to
adopt a provision in their Partnership Agreement whereby equity partners were
to retire as equity partners and divest their ownership shares in the
partnership at the end of the year in which they turned 65. A partner could
make individual arrangements to continue working as an employee or as a
“regular” partner without an equity stake, but such arrangements were stated in
the Agreement to be “the exception”.
[2]
In 2009, when he was 64, Mr. McCormick brought a
claim alleging that this provision in the Partnership Agreement constituted age
discrimination contrary to s. 13(1) of the British Columbia Human Rights
Code.
[3]
Fasken applied to have the claim dismissed on
the grounds that the complaint was not within the jurisdiction of the tribunal
and that there was no reasonable prospect that the complaint would succeed. In its view,
Mr. McCormick, as an equity partner, was not in the type of workplace
relationship covered by the Code.
[4]
The issue before this Court, therefore, is how
to characterize Mr. McCormick’s relationship with his firm in order to
determine if it comes within the jurisdiction of the Code over
employment. That requires us to examine the essential character of the
relationship and the extent to which it is a dependent one.
[5]
At the time this complaint was brought, Fasken
had 650 lawyers worldwide, of whom 260 were equity partners. There were about
60 equity partners in Fasken’s Vancouver office. Responsibility for the
day-to-day running of the partnership is delegated through the Partnership
Agreement to the Partnership Board, consisting of 13 equity partners, including
three from the British Columbia region, elected to three-year terms by the
equity partners. Before the creation of the Board, this responsibility had been
given to the “Executive Committee”. In 1998-1999, Mr. McCormick served for a
year on that committee.
[6]
The Board determines the compensation criteria
for equity partners.
The compensation criteria in place at the relevant time included the quality of
the legal work, teamwork, generation of profitable business from new and
existing clients, profitable maintenance of existing clients, contribution to
the firm’s image, reputation and seniority, profitable personal production,
businesslike personal practice management, contribution to firm activities,
ancillary income generated for the firm, and peer review. A regional
compensation committee, comprised of equity partners, allocates the firm’s
profits to the equity partners in the region based on these criteria. There is
a limited right of appeal back to the committee based on information not
available at the time the initial allocation was made.
[7]
The Board appoints and gives direction to the
firm’s managing partner, who is responsible for the overall management of the
firm and who is accountable to the Board. The duties of the managing partner
include “managing and structuring the human resources of the Firm, including
Partners, associates and staff” and “delegat[ing] specific functions,
responsibilities, authorities and accountabilities to Regional Managing
Partners, committees, task forces, individual Partners or associates, as
appropriate, and supervis[ing] the execution of those tasks”. Within the firm, all
management and support staff report directly or indirectly to a chief operating
officer.
The chief operating officer reports through the firm’s managing partner to the
Board.
[8]
All written opinions given to a client are the
opinion of the firm, and must be reviewed and approved by a partner other than
the partner who prepared it. The firm appoints a “client manager” for each
client, who may not be the lawyer who brought the client to the firm. Each
matter the firm handles for a client is overseen by a “file manager”, who is
responsible for ensuring that the matter is efficiently and properly dealt
with. The client manager monitors the performance of the file manager for each
matter. All content produced by lawyers, including equity partners, becomes the
property of the firm. Any income earned by a partner that relates in any manner
to the practice of law is deemed to be property of the firm. Partners are
prohibited from entering into financial arrangements or contracts in the name
of the firm without the authorization of the firm’s managing partner, Board
Chair, regional managing partner or two members of the Board.
[9]
A vote of the equity partnership as a whole is
required for such matters as an amendment to the Partnership Agreement, the
admission of a new equity partner, the expulsion of an equity partner, the
dissolution of the firm, the removal of the managing partner, the opening of a new
office, as well as the approval of certain significant expenses or debts.
[10]
An equity partner also has a capital account
with the firm, which is paid out when he or she leaves the firm. The aggregate of the
partners’ capital accounts represents the funding of the partnership. Partners
are liable for the debts of the partnership to the extent that they are not
covered by insurance or which the Board elects to treat as an expense, and as
limited by s. 104 of the Partnership Act. If the partnership is
dissolved, partners are entitled to receive a share of the assets remaining
after all of the partnership’s debts and obligations are satisfied.
[11]
An equity partner like Mr. McCormick has an
ownership interest in the firm. The terms of the Partnership Agreement require
that equity partners divest their ownership shares in the partnership at the
end of the year in which they turn 65. All equity partners are subject to this
time limit on their ownership interests in the firm. A partner may make
individual arrangements to continue working as an employee or as a “regular”
partner without an equity stake, but such arrangements are stated in the
Agreement to be “the exception rather than the rule”.
[12]
Mr. McCormick brought a complaint to the British
Columbia Human Rights Tribunal, arguing that this provision of the Partnership
Agreement constituted age discrimination in employment, contrary to s. 13(1) of
the Code. Fasken brought an application to dismiss Mr. McCormick’s claim
on the grounds that the Tribunal did not have jurisdiction over the claim
because Fasken was not in an employment relationship with Mr. McCormick.
[13]
In assessing whether Mr. McCormick was in an
employment relationship with the firm, the Tribunal relied on the factors it
had developed in Crane v. British Columbia (Ministry of Health Services)(No.
1) (2005), 53 C.H.R.R. D/156, rev’d on other grounds (2007), 60 C.H.R.R.
D/381 (B.C.S.C.): utilization, control, financial burden, and remedial purpose.
Under the first factor, the Tribunal found that Fasken “utilized” Mr. McCormick
to provide legal services to the firm’s clients and to generate intellectual
property. Under the second, the Tribunal found that Fasken exercised control
over Mr. McCormick through the direction given by managing partners and client
and file managers. With respect to remuneration, the Tribunal found that
despite the fact that the partnership involves sharing profits rather than
paying fixed wages, the firm nevertheless had the burden of determining and
paying Mr. McCormick’s compensation. Finally, the Tribunal concluded that
allegations that Fasken treated Mr. McCormick differently because of his age
engaged the broad remedial purposes of the Code. It concluded that there
was therefore an employment relationship and dismissed Fasken’s application.
Fasken’s application for judicial review was dismissed by the B.C. Supreme
Court.
[14]
The B.C. Court of Appeal allowed Fasken’s
appeal, concluding that Mr. McCormick, as a partner, was not in an employment
relationship pursuant to the Code. It held that because a partnership
is not, in law, a separate legal entity from its partners, it is a legal
impossibility for a partner ever to be “employed” by a partnership of which he
or she is a member.
[15]
For the reasons that follow, I agree with the Court of
Appeal that the Tribunal’s decision was incorrect and that the Tribunal had no
jurisdiction over Mr. McCormick’s relationship with the firm, but do not accept
that a partner can never be an employee for purposes of the Code. The
key is the degree of control and dependency.
Analysis
[16]
In the prior proceedings, the parties did not
dispute that the standard of review was correctness. Since the issue does not
deal with a finding of fact or the exercise of the Tribunal’s discretion, under
s. 59 of the B.C. Administrative Tribunals Act a correctness standard
is mandated: Moore v. British Columbia (Education), [2012] 3 S.C.R. 360,
at paras. 55-57; British Columbia (Workers’ Compensation Board) v. Figliola,
[2011] 3 S.C.R. 422, at paras. 18-20.
[17]
The Code is quasi-constitutional
legislation that attracts a generous interpretation to permit the achievement
of its broad public purposes: Winnipeg School Division No. 1 v. Craton,
[1985] 2 S.C.R. 150; Ontario Human Rights Commission v. Simpsons-Sears Ltd.,
[1985] 2 S.C.R. 536, at p. 547, per McIntyre J.; Canadian National
Railway Co. v. Canada (Canadian Human Rights Commission), [1987] 1 S.C.R.
1114, at pp. 1133-36; Council of Canadians with Disabilities v. VIA Rail
Canada Inc., [2007] 1 S.C.R. 650.
[18]
Those purposes include the prevention of
arbitrary disadvantage or exclusion based on enumerated grounds, so that
individuals deemed to be vulnerable by virtue of a group characteristic can be
protected from discrimination.
[19]
The Code achieves those purposes by
prohibiting discrimination in specific contexts. One of those contexts is
“employment”. The definition of employment must be approached consistently with
the generous, aspirational purposes set out in s. 3 of the Code and understood
in light of the protective nature of human rights legislation, which is “often the final refuge of the disadvantaged and the
disenfranchised” and of “the most vulnerable members of society”: Zurich Insurance Co. v. Ontario (Human
Rights Commission), [1992] 2 S.C.R. 321, at p.
339. This is the philosophical framework for ascertaining whether a
particular workplace relationship represents the kind of vulnerability the Code
intended to bring under its protective scope.
[20]
Mr. McCormick’s claim was based on age, an
enumerated ground, and was brought under s. 13 of the Code, which
states:
13 [Discrimination in employment] (1) A person must not
(a) refuse to employ or refuse to continue to employ a person, or
(b) discriminate against a person regarding employment or any term
or condition of employment
because
of the race, colour, ancestry, place of origin, political belief, religion,
marital status, family status, physical or mental disability, sex, sexual
orientation or age of that person or because that person has been convicted of
a criminal or summary conviction offence that is unrelated to the employment or
to the intended employment of that person.
. . .
(3)
Subsection (1) does not apply
(a) as it relates to age, to a bona fide scheme based on seniority,
or
(b) as it relates to marital status, physical or mental disability,
sex or age, to the operation of a bona fide retirement, superannuation or
pension plan or to a bona fide group or employee insurance plan, whether or not
the plan is the subject of a contract of insurance between an insurer and an
employer.
(4) Subsections (1) and (2) do not apply with respect to a refusal,
limitation, specification or preference based on a bona fide occupational
requirement.
“[E]mployment”
and “person” are defined in s. 1 as follows:
“employment” includes the relationship of master and servant, master
and apprentice and principal and agent, if a substantial part of the agent’s
services relate to the affairs of one principal, and “employ” has a
corresponding meaning;
. . .
“person” includes an employer, an employment agency, an employers’ organization,
an occupational association and a trade union;
[21]
While the starting point of the analysis is
found in the legislative language of “master and servant”, “master and
apprentice”, and “principal and agent”, it is important to note that the
definition of employment “includes” these relationships, but is not restricted
to them (Ruth Sullivan, Sullivan on the Construction of Statutes (5th
ed. 2008), at p. 239; National Bank of Greece (Canada) v. Katsikonouris,
[1990] 2 S.C.R. 1029, at p. 1041). Moreover, relying on a formalistic approach
to a “master and servant” relationship, resurrects an unduly restrictive
traditional test for employment (H. W. Arthurs, “The Dependent Contractor: A
Study of the Legal Problems of Countervailing Power” (1965), 16 U.T.L.J.
89; George W. Adams, Canadian Labour Law (2nd ed. (loose-leaf)), at p.
6-35). At the same time, the relationships which are deemed to be included
should be analogous to those set out in the definition. As this Court said in University
of British Columbia v. Berg, [1993] 2 S.C.R. 353: “It is the duty of boards
and courts to give [provisions] a liberal and purposive construction, without
reading the limiting words out of the Act or otherwise circumventing the
intention of the legislature” (p. 371).
[22]
The jurisprudence confirms that there should be
an expansive approach to the definition of “employment” under the Code.
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: Canadian Pacific Ltd. v. Canada (Human Rights
Commission), [1991] 1 F.C. 571 (C.A.); Pannu v. Prestige Cab Ltd. (1986),
73 A.R. 166 (C.A.); Yu v. Shell Canada Ltd. (2004), 49 C.H.R.R. D/56
(B.C.H.R.T.). See also Canada (Attorney General) v. Rosin, [1991] 1 F.C.
391 (C.A.); Mans v. British Columbia Council of Licensed Practical Nurses
(1990), 14 C.H.R.R. D/221 (B.C.C.H.R.).
[23]
Deciding who is in an employment relationship
for purposes of the Code means, in essence, examining how two synergetic
aspects function in an employment relationship: control exercised by an
employer over working conditions and remuneration, and corresponding dependency
on the part of a worker. In other words, 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 more the work life
of individuals is controlled, the greater their dependency and, consequently,
their economic, social and psychological vulnerability in the workplace: Guy
Davidov, “The Three Axes of Employment Relationships: A Characterization of
Workers in Need of Protection” (2002), 52 U.T.L.J. 357, at pp. 377-94;
Arthurs, at pp. 89-90; International Woodworkers of America v. Atway
Transport Inc., [1989] OLRB Rep. 540; Pointe-Claire (City) v. Quebec
(Labour Court), [1997] 1 S.C.R. 1015.
[24]
The test applied by the Human Rights Tribunal in
British Columbia for determining whether someone is in an employment
relationship under the Code was developed in Crane, where
it identified the following indicia:
a. “Utilization” — this . . . looks to the question of whether the
alleged employer “utilized” or gained some benefit from the employee in
question;
b. Control — did the alleged employer exercise control over the
employee, whether in relation to the determination of his or her wages or other
terms and conditions of employment, or in relation to their work more
generally, such as the nature of the work to be performed or questions of
discipline and discharge?
c. Financial burden — did the alleged employer bear the burden of
remuneration of the employee? and
d. Remedial purpose — does the ability to remedy any discrimination
lie with the alleged employer? [para. 79]
This test too is, in
essence, a control/dependency test. The concepts of utilization, control,
financial burden, as well as the ability of the employer to remedy any
discrimination, all ultimately relate to whether the employer controls working
conditions and remuneration, resulting in dependency on the part of the
employee.
[25]
Placing the emphasis on control and dependency
in determining whether there is an employment relationship is consistent with
approaches taken to the definition of employment in the context of protective
legislation both in Canada and internationally: Davidov, at pp. 365-71. The
Ontario Labour Relations Board, for example, uses a seven-factor test for
determining if an employment relationship exists, based on indicia that relate
mainly to control and economic dependency. Among other criteria, the Board
asks whether the alleged employer exercises direction and control over the
performance of work; imposes discipline; has the authority to dismiss
employees; bears the burden of remuneration; and is perceived to be the
employer (York Condominium Corp., [1977] OLRB Rep. 645; Adams, at p.
6-36). That said, while significant underlying similarities may exist across
different statutory schemes dealing with employment, it must always be assessed
in the context of the particular scheme being scrutinized.
[26]
While the specific indicia used in other
jurisdictions may vary from those adopted by Canadian authorities, the
consistent animating themes are control and dependency. For example, in Clackamas
Gastroenterology Associates, P. C. v. Wells, 538 U.S. 440 (2003), a case
that required the U.S. Supreme Court to define who is an employee under the Americans
with Disabilities Act of 1990 (104 Stat. 327, as amended, 42 U.S.C. § 12101
et seq.), the court relied on the following control/dependency
factors:
“Whether the organization can
hire or fire the individual or set the rules and regulations of the
individual’s work
“Whether and, if so, to what
extent the organization supervises the individual’s work
“Whether the individual
reports to someone higher in the organization
“Whether and, if so, to what
extent the individual is able to influence the organization
“Whether the parties intended
that the individual be an employee, as expressed in written agreements or
contracts
“Whether the individual shares
in the profits, losses, and liabilities of the organization.” EEOC Compliance
Manual § 605:0009. [pp. 449-50]
[27]
Control and dependency, in other words, are a
function not only of whether the worker receives immediate direction from, or
is affected by the decisions of others, but also whether he or she has the
ability to influence decisions that critically affect his or her working life.
The answers to these questions represent the compass for determining the true
nature of the relationship.
[28]
While control and dependency define the essence
of an employment relationship for purposes of human rights legislation, this does
not mean that other indicia that courts and tribunals have developed, such as
the Crane factors, are unhelpful in assessing the extent to which
control and dependency are present. But such factors are unweighted taxonomies,
a checklist that helps explore different aspects of the relationship. While
helpful in framing the inquiry, they should not be applied formulaically. What
is more defining than any particular facts or factors is the extent to which
they illuminate the essential character of the relationship and the underlying
control and dependency. Ultimately, the key is the degree of control,
that is, the extent to which the worker is subject and subordinate to someone
else’s decision-making over working conditions and remuneration: Geoffrey
England, Individual Employment Law (2nd ed. 2008), at p. 19.
[29]
This brings us to partnerships generally.
British Columbia’s Partnership Act is modeled on the U.K. Partnership
Act 1890
(Alison R. Manzer, A Practical Guide to Canadian Partnership Law
(loose-leaf), at p. 1-2). Section 1 states that “‘firm’ is the collective term
for persons who have entered into partnership with one another”. Section 2
defines a partnership as “the relation which subsists between persons carrying
on business in common with a view of profit”. Accordingly, a partnership is by
its nature an entrepreneurial relationship among individuals agreeing to do
business together.
[30]
The conventional view of a partnership was
famously described in Lindley & Banks on Partnership (19th ed. 2010)
as a collection of partners, rather than a distinct legal entity separate from
the parties who are its members:
The law, ignoring the firm,
looks to the partners composing it; any change amongst them destroys the
identity of the firm; what is called the property of the firm is their
property, and what are called the debts and liabilities of the firm are their
debts and their liabilities. [para. 3-04]
(Cited with approval in Backman v. Canada, [2001] 1 S.C.R.
367, at para. 41. See also Boyd v. Attorney-General for British Columbia (1917),
54 S.C.R. 532; Green v. Harnum (2007), 269 Nfld. & P.E.I.R. 97
(N.L.C.A.); Blue Line Hockey Acquisition Co. v. Orca Bay Hockey Ltd.
Partnership (2008), 40 B.L.R. (4th) 83 (B.C.S.C.), at paras. 79-89, aff’d
(2009), 52 B.L.R. (4th) 108 (B.C.C.A.); Re Davies and Council of the
Institute of Chartered Accountants of Saskatchewan (1985), 19 D.L.R. (4th)
447 (Sask. Q.B.), at pp. 451-53; Coal Harbour Properties Partnership v. Liu
(2004), 48 B.L.R. (3d) 237 (B.C.C.A.), at para. 10.)
[31]
Among the distinctive features of a partnership
is that partners generally have a right to participate meaningfully in the
decision-making process that determines their workplace conditions and
remuneration (J. Anthony VanDuzer, The Law of Partnerships and Corporations
(3rd ed. 2009), at p. 75; Partnership Act, s. 27(e)). This is reflected
in, for example, the duty to render accounts to other partners in order to
permit them to have the information they need to participate in workplace
decisions and ensure that their interests are adequately considered. This duty
is set out in s. 31 of the Partnership Act:
31 Partners are bound to render true
accounts and full information of all things affecting the partnership to any
partner or his or her legal representatives.
[32]
Partnership agreements also typically create a
high threshold for expulsion and, unless the agreement explicitly provides
otherwise, a partner cannot be expelled by a simple majority of partners (Partnership
Act, s. 28). The Fasken Partnership Agreement, for
example, requires a special resolution passed by a meeting of all equity
partners, as well as a regional resolution in the partner’s region. When partners do
leave a partnership, they are entitled to be paid their share of the
partnership’s capital account: VanDuzer, at p. 73; Partnership Agreement, s.
9.5.
[33]
In other words, the control over workplace conditions
and remuneration is with the partners who form the partnership. In most cases,
therefore, partners are not employees of the partnership, they are,
collectively, the employer.
[34]
American courts have generally found that
partnerships are not employment relationships under anti-discrimination
legislation since even in a large partnership, partners are typically able to
influence the running of the partnership to a significant extent: Largie v.
TCBA Watson Rice, LLP, 2013 U.S. Dist. LEXIS 117688 (D.N.J.); Bowers v.
Ophthalmology Group, LLP, 2012 U.S. Dist. LEXIS 118761 (W.D. Ky.), rev’d on
other grounds 733 F.3d 647 (6th Cir. 2013); Kirleis v. Dickie, McCamey &
Chilcote, P.C., 2009 U.S. Dist. LEXIS 100326 (W.D. Pa.), at [*82]. In Clackamas,
however, the U.S. Supreme Court specifically left open the possibility
that nominal “partners” could still be considered employees in exceptional
circumstances based on an assessment of the substance of the relationship (p.
446; see also Equal Employment Opportunity Commission v. Sidley Austin Brown
& Wood, 315 F.3d 696 (7th Cir. 2002), at pp. 702-7).
[35]
Canadian and British courts have similarly held
that partnerships are not relationships of employment for purposes of other
forms of protective legislation, such as in the realm of workers’ compensation:
Ellis v. Joseph Ellis & Co., [1905] 1 K.B. 324 (C.A.); Re Thorne
and New Brunswick Workmen’s Compensation Board (1962), 33 D.L.R. (2d) 167
(N.B.S.C. (App. Div.)), aff’d [1962] S.C.R. viii.
[36]
This does not mean human rights legislation
cannot apply to partnerships, it means that an express statutory provision is
usually required, as is found in s. 44 of the U.K. Equality Act 2010,
2010, c. 15. The Explanatory Note to that provision states that a separate
provision protecting partners from discrimination was necessary because their
relationship with their partnership is not one of employment:
Because partners are mainly governed by
their partnership agreements, rather than by employment contracts, separate
provisions are needed to provide protection from discrimination, harassment and
victimisation for partners in ordinary and limited partnerships. [para. 158]
[37]
Partnership is also designated as a separate
category from employer/employee relationships in anti-discrimination legislation
in Australia and New Zealand: Sex Discrimination Act 1984 (Cth.), No. 4,
s. 17; Disability Discrimination Act 1992 (Cth.), No. 135, s. 18; Age
Discrimination Act 2004 (Cth.), No. 68, s. 21; Anti-Discrimination Act
1977 (N.S.W.), No. 48, ss. 10A, 27A and 49G; Anti-Discrimination Act
1991 (Qld.), No. 85, ss. 16 to 18; Equal Opportunity Act 1984 (S.A.),
ss. 33, 55 and 70; Equal Opportunity Act 2010 (Vic.), No.16, ss. 30 and 31;
Equal Opportunity Act 1984 (W.A.), ss. 14, 40 and 66E; Human Rights
Act 1993 (N.Z.), 1993, No. 82, s. 36.
[38]
While
the structure and protections normally associated with equity partnerships mean
they will rarely be employment relationships for purposes of human rights
legislation, this does not mean that form should trump substance. In this case,
for example, the Court of Appeal appeared to focus exclusively on partnership
as a legal concept, rather than examining the substance of the actual
relationship and the extent to which control and dependency played a role.
[39]
Turning to Mr. McCormick’s relationship with his
partnership and applying the control/dependency test, based on his ownership,
sharing of profits and losses, and the right to participate in management, I
see him more as someone in control of, rather than subject to, decisions about
workplace conditions. As an equity partner, he was part of the group that
controlled the partnership, not a person vulnerable to its control.
[40]
It is true that Fasken had certain
administrative rules to which Mr. McCormick was subject, but they did not
transform the substance of the relationship into one of subordination or
dependency. Management and compensation committees are necessary mechanisms to
implement and coordinate the firm’s policies, not limitations on a partner’s
autonomy. Fasken’s Board, regional managing partners, and compensation
committees were all directly or indirectly accountable to, and controlled by,
the partnership as a whole, of which Mr. McCormick was a full and equal member.
Under the Partnership Agreement, most major decisions, including those
relating to the firm’s mandatory retirement policy, were subject to a vote
of the partnership, in which all partners, including Mr. McCormick, had an
equal say.
Mr. McCormick was an equity partner when the current retirement policy was
adopted, and was entitled to vote on the very policy that he is now
challenging.
[41]
In addition to the right to participate in the
management of the partnership, as an equity partner Mr. McCormick benefited
from other control mechanisms, including the right to vote for — and stand for
election to — the firm’s Board; the duty that the other partners owed to him to
render accounts; the right not to be subject to discipline or dismissal; the
right, on leaving the firm, to his share of the firm’s capital account; and the
protection that he could only be expelled from the partnership by a special
resolution passed by a meeting of all equity partners and a regional resolution
in his region, arguably giving him tenure since there is no evidence of any
equity partners being expelled from this partnership.
[42]
Nor was Mr. McCormick dependent on Fasken in a
meaningful sense. It is true that his remuneration came exclusively from the
partnership, but this remuneration represented his share of the profits of the
partnership in accordance with his ownership interest. The partnership was run
for the economic benefit of the partners, including Mr. McCormick. While
the financial proceeds of Mr. McCormick’s work were pooled with those of other
lawyers in the firm, and the distribution of profits was ultimately determined
by internal committees, these committees applied criteria that were designed to
measure the partner’s contribution to the firm. Mr. McCormick drew his income
from the profits of the partnership and was liable for its debts and losses. In
addition, he had a capital account and was entitled to share in the
partnership’s assets if it dissolved. In effect, Mr. McCormick was not working
for the benefit of someone else, as the Tribunal’s reasons suggest, he was, as an
equity partner, in a common enterprise with his partners for profit, and was
therefore working for his own benefit.
[43]
Finally, it must be observed that in order to
change the firm’s mandatory retirement policy, all of Fasken’s equity partners
would have been entitled to vote. Responsibility for remedying any alleged
inequity thus lay in the hands of Mr. McCormick as much as any other equity
partner. Instead, he financially benefited for over 30 years from the
retirement of the other partners. In fact, in no material way was Mr. McCormick
structurally or substantively ever in a subordinate relationship with the other
equity partners.
[44]
I appreciate that the Tribunal sought, through
the application of the Crane factors, to assess Mr. McCormick’s
relationship with his firm, but in so doing, it paid insufficient attention to
whether he was actually subject to the control of others and dependent on them.
It assessed “control”, for example, in terms of some administrative
restrictions on partners rather than examining the underlying power dynamics of
the relationship. And it found that Mr. McCormick was “utilized” and
“remunerated” by Fasken, while disregarding the fact that the firm was run for
the benefit of, and by, its equity partners, including Mr. McCormick.
[45]
In the absence of any genuine control over Mr.
McCormick in the significant decisions affecting the workplace, there cannot,
under the Code, be said to be an employment relationship with the
partnership. Far from being subject to the control of Fasken, Mr. McCormick was
among the partners who controlled it from 1979, when he became an equity
partner, until he left in 2012. The Tribunal therefore erred in concluding
that it had jurisdiction over his relationship with the partnership.
[46]
This is not to say that a partner in a firm can
never be an employee under the Code, but such a finding would only be
justified in a situation quite different from this case, one where the powers,
rights and protections normally associated with a partnership were greatly
diminished.
[47]
But the fact that a partner like Mr. McCormick
has no remedy under the Code does not necessarily mean that partners
have no recourse for claims of discrimination. One of the duties partners owe
each other is the duty of utmost fairness and good faith, set out in s. 22 of
the Partnership Act:
22 (1) A partner must act with
the utmost fairness and good faith towards the other members of the firm in the
business of the firm.
(2)
The duties imposed by this section are in addition to,
and not in derogation of, any enactment or rule of law or equity relating to
the duties or liabilities of partners.
[48]
This duty is an important source of protection
for partners: Hitchcock v. Sykes (1914), 49 S.C.R. 403, at p. 407;
Cameron v. Julien (1957), 9 D.L.R. (2d) 460 (Ont. C.A.); Rochwerg v.
Truster (2002), 58 O.R. (3d) 687 (C.A.). While this case does not require
us to decide the point, the duty of utmost good faith in a partnership may well
capture some forms of discrimination among partners that represent arbitrary
disadvantage: see Manitoba Law Reform Commission, Good Faith and the
Individual Contract of Employment, Report #107 (2001), at pp. 22 and 32-33;
Emily M. S. Houh, “Critical Race Realism: Re-Claiming the Antidiscrimination
Principle through the Doctrine of Good Faith in Contract Law” (2005), 66 U.
Pitt. L. Rev. 455. That said, absent special circumstances, it is difficult
to see how the duty of good faith would preclude a partnership from instituting
an equity divestment policy designed to benefit all partners by ensuring the
regenerative turnover of partnership shares.
[49]
The appeal is dismissed with costs.
Appeal
dismissed with costs.
Solicitors for the
appellant: TevlinGleadle Employment Law Strategies, Vancouver.
Solicitors for the
respondent: Nathanson Schachter & Thompson, Vancouver.
Solicitor for the
intervener the Alberta Human Rights Commission: Alberta Human Rights
Commission, Edmonton.
Solicitor for the
intervener the British Columbia Human Rights Tribunal: British Columbia Human
Rights Tribunal, Vancouver.
Solicitors for the
interveners Ernst & Young LLP, KPMG LLP, Deloitte LLP,
PricewaterhouseCoopers LLP, BDO Canada LLP and Grant Thornton LLP: Lenczner
Slaght Royce Smith Griffin, Toronto.
Solicitors for the
intervener the Young Bar Association of Montreal: Langlois Kronström
Desjardins, Montréal.
Solicitor for the
intervener the Ontario Human Rights Commission: Ontario Human Rights
Commission, Toronto.
Solicitor for the
intervener the Canadian Human Rights Commission: Canadian Human Rights
Commission, Ottawa.