Managing Partner: McCormick decision important for success of firms

Sean Weir

Managing Partners at Canadian law firms across Canada no doubt breathed a sigh of relief after yesterday’s BC Court of Appeal ruling found that there was no employment relationship between Fasken Martineau DuMoulin LLP and partner John McCormick, who did not want to abide by the firm’s mandatory retirement policy.

The firm is quoted in the Globe and Mail as saying:

“We are satisfied with the decision, which reinforces our understanding of the law in British Columbia surrounding the terms of partnership agreements,” William Westeringh, the firm’s managing partner in Vancouver, said in an e-mailed statement. “This is an isolated issue that is unprecedented at Fasken Martineau.”

Murray Tevlin, John McCormick’s counsel, did not want to comment on the ruling yet but said “we are still considering the decision.”

Sean Weir, National Managing Partner of Borden Ladner Gervais, told Lexpert that this is a very good decision:

It is important for the future success of professional firms, particularly in today’s competitive & fast changing environment, that partners think and act like owners – not as employees – and that firms treat their partners accordingly. It is also important that a firm can govern itself knowing that its partners are in fact partners and not employees. This decision by the Court of Appeal allows these important principles and strengths of a partnership to continue.

Lexpert ran a feature on mandatory retirement at law firms in our January 2012 issue.

In the article, employment lawyer Mary Porjes told Lexpert about some of the implications of the lower court decision which had ruled the other way (and had not yet been overturned by the BC Court of Appeal):

“Partnership has always been considered sacrosanct,” says Porjes, adding that, if the case eventually succeeds on the merits – and Faskens has appealed the BC Supreme Court decision- it could have real consequences on a law firm’s ability to carry out succession planning.

“If a partner can be an employee for human-rights legislation, can a partner be an employee in respect to employment-law rights ?” she says. “As it stands now, if I’m an older partner and I’m asked to leave, the rights I have on departure are covered by a partnership agreement. So I get certain payouts – work in progress and things like that.

“But when I read this case I wondered whether, if a partner is asked to leave, I can now argue that that partner is entitled to a severance ?”

Porjes expects the question of mandatory retirement in law firms to be tested by retirement-age partners in other provinces even as McCormick wends its way through the courts in BC. She can see it going all the way to the Supreme Court of Canada.

If it does, she says, McCormick – and Baby Boomers – may just get a sympathetic hearing. “The Supreme Court has said a person’s job is key to their economic security, human dignity and self-respect — and those words are frequently cited today in employment cases. It’s the same kind of remedial public-policy approach taken by human-rights tribunals. “When they [Supreme Court Justices] interpret the Human Rights Code, it’s given a very broad reading.”

If McCormick succeeds and mandatory retirement provisions in partnership agreements at law firm are unenforceable, bloated rosters and intergenerational tensions won’t be the only ramifications, says Porjes. There could also be all kinds of lawsuits for retroactive compensation.

Given that McCormick is still “considering” the decision, the Supreme Court of Canada may still have the opportunity to determine how “sacrosanct” a law firm partnership really is.

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