Canada: BC Court Of Appeal Concludes That A Partner Is Not An Employee Of A Partnership

On July 19, 2012, the British Columbia Court of Appeal released its decision on the issue of whether a partner in a partnership is an employee of that partnership for the purposes of the BC Human Rights Code (the Code). The Court of Appeal concluded that a partner is not an employee of a partnership in law for the purposes of the Code. For more information see, Fasken Martineau DuMoulin LLP v. British Columbia Human Rights Tribunal and John Michael McCormick, 2012 BCCA 313.

We previously wrote about this case when the BC Supreme Court upheld a decision of the BC Human Rights Tribunal (the Tribunal) in June 2011.

Background

John McCormick is a lawyer at Fasken Martineau DuMoulin LLP (Fasken) and one of about 60 equity partners in its Vancouver office. As such, he is a party to the partnership agreement which governs the relationship between all Fasken partners.

A term of the partnership agreement was that partners must retire at age 65.

In 2009, Mr. McCormick filed a complaint with the Tribunal alleging that Fasken discriminated against him by requiring him to retire at age 65. Fasken argued that the Tribunal did not have jurisdiction to hear the complaint as it was not in an employment relationship with Mr. McCormick.

The Tribunal

Section 13 of the Code prohibits discrimination in employment. In McCormick v. Fasken Martineau DuMoulin (No. 2), Fasken made an application to the Tribunal to dismiss Mr. McCormick's complaint arguing that the Tribunal did not have jurisdiction to hear it. The issue was simply whether Mr. McCormick, as a partner, and Fasken were in an employment relationship.

The Tribunal noted that section 13 of the Code takes a broad, liberal and purposive approach to such an analysis for human rights purposes. It analysed the four indicators of an employment relationship (utilisation, control, financial burden and remedial purpose) and found that, for the purposes of the Code, Mr. McCormick was an employee and the Fasken partnership was an employer in all of the circumstances.

The Supreme Court

Fasken applied to the BC Supreme Court for judicial review of the Tribunal's decision. The Court upheld the Tribunal decision and confirmed that Mr. McCormick was an employee for the purposes of the Code.

The Court of Appeal

The Court of Appeal overturned the two previous decisions, and ruled that, as an equity partner, Mr. McCormick was not an employee of the Fasken partnership. It held that the Tribunal did not have jurisdiction to decide the matter as there was no employment relationship between Mr. McCormick and Fasken.

The Court confirmed that, in Canadian law, a partnership is not a separate legal entity from its partners and a partner cannot be an employee of, or be employed by, a partnership of which he is a member. The Court considered whether this "well-established principle of law" was overridden by the broad, liberal and purposive interpretation that is to be taken with respect to the Code and concluded that it did not.

This broad, liberal and purposive interpretation of the Code has, in the past, had the effect of extending the definition of "employment" to relationships that generally do not fall into that category in law. (For example: the relationship between an employee of an independent contractor and the company to which the independent contractor provides services Canadian Pacific Ltd. v. Canada (Human Rights Commission), [1991] 1 F.C. 571; a taxi driver and the taxi company (Pannu, Kang and Gill v. Prestige Cab Ltd. (1986), 73 A.R. 166 (C.A.), 31 D.L.R. (4^th) 338; and a licensee and a licensing body(Vancouver Rape Relief Society v. Nixon, 2005 BCCA 601, 262 D.L.R. (4^th) 360)). Before this case, it had not been extended to a partnership.

The Court focused, in particular, on the separate legal identity of an employee and employer and noted that at law, a partnership is not a separate legal entity and cannot become one. In a partnership context, the only relationship that exists is that of the partner with respect to the rest of the partners, but not between the partner and the partnership. Without two separate "persons" there could be no employment relationship.

The Court concluded that these fundamental principles of the law of partnerships made it a "legal impossibility" for Mr. McCormick to be employed by Fasken and that the Code did not extend to partnerships. The Court further stated that although, the interpretation of the Code is a legal exercise, where there are gaps in the legislation, it falls to the legislature, not for the Court, to address them.

What does this mean?

In the past, as previously noted, in some cases the Tribunal and the Courts have stretched the meaning of "employment" in the context of human rights legislation. This case, however, confirms that the interpretation of human rights legislation remains a legal exercise where fundamental principles of law still apply despite the broad, liberal and purposive approach that is to be taken in their interpretation, and that any such "stretch" must still be within the confines of fundamental legal principles.

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