Labor & Employment Law Daily Armstrong Teasdale equity partner, forced to retire at age 70, not an employee and so not covered by ADEA
Friday, December 6, 2019

Armstrong Teasdale equity partner, forced to retire at age 70, not an employee and so not covered by ADEA

By Kathleen Kapusta, J.D.

The Armstrong Teasdale attorney argued that a provision in his firm’s partnership agreement that requires mandatory retirement at age 70 violated the ADEA.

Guided by factors set out by the U.S. Supreme Court’s Clackamas decision and its review of the record here, the Eighth Circuit found that an attorney’s role as equity partner in his law firm “was not simply a title that carried no legal significance.” Rather, observing that he, among other things, shared in the firm’s profits and loses, voted on changes in the firm’s polices, and could be expelled from the firm in very limited ways, the court found that “consistent with the manner in which the term ‘employee’ has been interpreted under federal antidiscrimination laws,” he was not an employee of the firm and therefore was not covered by the ADEA. Accordingly, it affirmed the lower court’s grant of judgment on the pleadings in favor of the firm on his claim that its mandatory retirement policy violated the ADEA (Von Kaenel v. Armstrong Teasdale, LLP, December 3, 2019, Erickson, R.).

The attorney, who had joined the law firm in 1972, became an equity partner six years later. As an equity partner, he could vote on accepting new partners into the partnership and could be terminated only by vote of the other partners or by operation of the firm’s mandatory retirement policy, which required equity partners to leave the firm at the end of the calendar year in which the partner turned 70.

Forced to retire. When the attorney turned 70 in November 2014, he was forced to retire at the end of the year. But for the policy, he claimed, he would not have retired for another five years. Because he continued to practice law after leaving the firm, he was ineligible under the policy to receive the severance benefits to which he would otherwise have been entitled.

Prior proceedings. Alleging that the policy was discriminatory, the employee filed a charge with the EEOC and the Missouri Commission on Human Rights (MCHR). Finding that the attorney, at age 70, fell outside the protected age group, the MCHR issued a notice of termination of proceedings. The attorney then filed a petition for a writ of mandamus in state court and after an evidentiary hearing, the court, dismissing his petition, found that as an equity partner, he was not covered by the Missouri Human Rights Act.

He subsequently sued in federal court, alleging discriminatory termination in violation of the ADEA. Granting judgment on the pleadings in favor of his former firm, the district court found he was collaterally estopped from relitigating the state court’s decision that he was not an “employee” covered by the MHRA. It also found that because, like the MHRA, the ADEA only applies to employees, his ADEA claim also failed.

Clackamas. Addressing for the first time whether a partner in a firm may be deemed “an employee” of the firm for purposes of the ADEA, the Eighth Circuit turned to Clackamas Gastroenterology Associates, P.C. v. Wells, in which the Supreme Court, in the context of an ADA claim, explained that resolution of whether shareholder-director physicians that are part of a professional corporation are employees “depends on ‘all of the incidents of the relationship with no one factor being decisive.’” Further, the appeals court observed, other circuits, relying on the factors set out in Clackamus, have found that partners or shareholders vested with an ownership interest and/or authority to manage and control the firm or corporation are not “employees” covered by the ADEA.

And here, the court said, “if we peer beneath the title and probe the circumstances” of the attorneys’ relationship with the firm as an equity partner, his compensation scheme which included sharing in the firm’s profits and losses, his ability to vote on changes to the firm’s policies or admission of new partners, the lack of supervision over his substantive work, the influence he had when requesting to lower his hourly rate for a client, and the limited ways in which he could be expelled from the firm simply did not bear a close relationship to that of an employee. Accordingly, the court found that he was not an employee of the firm and, therefore, was not covered by the ADEA and his firm was entitled to judgment as a matter of law.

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