Court of Appeal Decision of the Week

When is a Lawyer a Partner or Employee?

Case: Daniel v. Miller, Canfield, Paddock and Stone, LLP, 2017 ONCA 697 (CanLII)

Keywords: Lawyer; Employee; Partner; McCormick v. Fasken Martineau DuMoulin LLP, 2014 SCC 39 (CanLII); Backman v. Canada, [2001] 1 SCR 367, 2001 SCC 10 (CanLII)

Synopsis:

The Appellant, Julie Daniel, practises law in the City of Windsor in the specialty of commercial and financing transactions. The Appellant joins the Respondent law firm as an associate in March, 2000. In 2006, the Appellant is elevated from the status of an associate lawyer and accepted as a “Salaried International Principal”. Following dissolution of the law firm, the Appellant is not offered a comparable position or remuneration elsewhere, nor is she offered a severance package.

The Appellant claims she was an employee and that, under the circumstances, termination of her employment amounts to a constructive dismissal, without notice. The Respondent firm’s position is that, when the plaintiff became a “Salaried International Principal”, she became a partner and as a partner cannot maintain an action against the firm. (For more background information see Daniel v Miller, Canfield, Paddock and Stone LLP, 2016 ONSC 5712 (CanLII)).

The Trial Judge determines the Appellant is a partner of the firm. On Appeal, the Court of Appeal confirms the decision, finding no palpable and overriding error.

Importance:

Typically, lawyers aspire to be partners. In this case, the Appellant tried very hard to have the Court of Appeal describe her as an employee. The Appellant’s submission was that, since her work was “controlled by the partner whose clients she served” and she was “dependent on the firm for her work”, that she could not have been a partner. The Court of Appeal disagreed. (See para. 1).

In its decision, the Court of Appeal reviewed relevant appellate jurisprudence including McCormick v. Fasken Martineau DuMoulin LLP, 2014 SCC 39 (CanLII) and Backman v. Canada, 2001 SCC 10 (CanLII). The Court of Appeal determined that McCormick does not establish “control and dependency” as an all-purpose test for determining whether a person is an employee or partner. (See para. 3). McCormick was described as being more relevant to the issue of whether a mandatory retirement provision in a law firm’s partnership agreement offends the Human Rights Code, R.S.B.C. 1996, c. 210.

Citing Backman v. Canada, 2001 SCC 10 (CanLII) at para. 26, the Court of Appeal determined that the proper test requires an examination of “…all the surrounding circumstances, the substance of the relationship, the behaviour of the parties and the intention of the parties”. (See para. 3). The Court of Appeal quoted Iacobucci and Bastarache JJ.’s description of the test as follows:

Whether a partnership has been established in a particular case will depend on an analysis and weighing of the relevant factors in the context of all the surrounding circumstances. That the alleged partnership must be considered in the totality of the circumstances prevents the mechanical application of a checklist or a test with more precisely defined parameters. (See para. 3).

The Court of Appeal also referred to the following list of factors which were relevant to the Trial Judge’s decision the Appellant had been a partner in the firm (and was thereby unable to sue for wrongful dismissal damages):

  • conducted herself as a partner, was treated as a partner and was held out to clients, the Law Society and Canada Revenue Agency as a partner;
  • received a draw, without source deductions of income tax or employment insurance, and filed her tax returns as a partner;
  • made contributions to a capital account, which were recorded in the financial statements, and was at risk that her capital contributions could be lost;
  • received enhanced benefits and insurance, which were available only to partners in the firm;
  • attended partners’ meetings at which decisions were made, participated in the management of the firm and, contrary to her evidence, was entitled to vote on decisions made at partners’ meetings;
  • had access to confidential information, which was only available to partners, about the business and financial affairs of the firm;
  • signed firm cheques and opinions on behalf of the firm;
  • shared in the profits of the firm through a bonus dependent on the profit of the firm; and
  • had “built up a not insignificant practice of her own.” (See para. 4).

Counsel for the Appellant: Robert Matlack (Matlack Law Office, Windsor)

Counsel for the Respondent: Myron Shulgan & Nicole Marcus (Strosberg Sasso Sutts LLP, Windsor)

Discuss on CanLii Connects

Posted: Wednesday, September 13, 2017