When is an Owner an Employee?


Time Published on June 24, 2014

When is an owner also an “employee”?  The Supreme Court of Canada recently rendered a decision on the question of whether a partner at a law firm could be an employee under human rights legislation.  The answer, perhaps not a surprise, is ‘it depends’…

McCormick v Faskin Martineau

In McCormick v Fasken Martineau, the Supreme Court dealt with the complaint of a former partner at a major law firm whose contract stipulated forced retirement at age 65.  McCormick alleged that the clause discriminated against him on the basis of age.  The question before the Court was whether McCormick was an employee of the law firm, which would bring the matter within the jurisdiction of the British Columbia Human Rights Tribunal.

Generally in partnerships, partners have the ability to participate meaningfully in the decision-making process concerning their workplace conditions and remuneration.  In addition, partnership agreements tend to be very difficult to break, and a high threshold (usually a supermajority of partners) is required to expel a partner. 

McCormick was a apparently a high-ranking member of the partnership, who at times exercised significant managerial authority.  Moreover, he was able to work on his own account, as ultimately his remuneration was determined by evaluating his contribution to the firm.  Given the high degree of responsibility and autonomy, the Court found McCormick’s relationship with the firm was not one of dependency as would be the case in an employment relationship.

In essence, the Court found that since the partners who form the partnership control the working conditions and remuneration, they are better described as the employer rather than employees.

The Court emphasized that when interpreting human rights legislation, courts must take a “large and liberal” lens to the exercise in keeping with within the aims of the statute, namely protecting vulnerable members of society.  As a consequence, in the human rights context, courts and tribunals must determine whether a particular workplace relationship represents the kind of vulnerability that human rights legislation intended to bring under its protective scope.

The Court found that two aspects of an employment relationship were relevant for the test:

  1. The control exercised by an employer over working conditions and remuneration; and
  2. Corresponding dependency on the part of the worker

Using this test, the Court held that McCormick was not an employee and was therefore not subject to the jurisdiction of the Tribunal.  However, the Court did not foreclose the possibility that, on different facts, a business owner could be an employee with access to human rights protection in employment.

What employers need to know

The test used by the Supreme Court is not revolutionary and is in many ways a reformulation of prior case law.  It is not clear whether the Ontario Human Rights Tribunal will use this formulation of the test, although it would be surprising if it did not follow the Supreme Court’s lead.  This case re-emphasizes the importance of a clear understanding of all employment and work relationships, and the need for employers to understand their corresponding duties.

 

Tag employment law,  human rights