Mandatory retirement clauses breach Quebec Charter, rules court

Professional services firms that have mandatory retirement policies and provisions that require partners to divest their ownership shares solely on the basis of age are discriminatory and in breach of the Quebec Charter of human rights and freedoms held Quebec Superior Court in a ruling that has the legal community buzzing over its implications.

In a case that pitted a Montreal municipal and labour and employment law firm against its founder, the decision by Quebec Superior Court Justice Stéphane Lacoste is expected to have wider repercussions than the thorny issue of mandatory retirement, according to legal observers. Following the decision in DHC Avocats inc. c. Dufresne, 2022 QCCS 58, typical arrangements made by professional services firms in succession planning such as “unpartnering” or changing the status of their senior partners while still allowing them to work in the firm may be called into question, added legal experts. Continue reading “Mandatory retirement clauses breach Quebec Charter, rules court”

Mandatory retirement age for municipal judges not discriminatory

Two municipal judges who sought to stay on the bench beyond the retirement age of 70 lost their legal battle after Quebec Superior Court held that a mandatory retirement age for provincially-nominated magistrates is not discriminatory and is necessary to preserve judicial independence.

But the ruling has not settled the issue of mandatory retirement age for provincially-nominated judges, according to Gérald Tremblay, former batonnier of the Quebec law society. Seven years ago, an Ontario Superior Court judge ruled that a law forcing justices of the peace in the province to retire at the age of 70 was a violation of equality rights guaranteed under the Canadian Charter of Rights and Freedoms. Justice Strathy, now Chief Justice of the Ontario Court of Appeal, substituted – or “read in” – new provisions that allow justices of the peace to keep working until age 75, subject to the annual approval of the Chief Justice of the Ontario Court of Justice, even though the official retirement age is 65.

“It’s very interesting that the Quebec decision did not follow Justice Strathy’s ruling,” remarked Tremblay, a partner with McCarthy Tétrault LLP. “That is the Canadian Constitution at work: a provincial court is not bound by a decision of a court decided in another province. Eventually a court of appeal is to going to have to decide which of the two rulings is more persuasive.”

Justices Philippe Clément and Michel Paquin, who have more than 30 years of experience as municipal judges, argued that the mandatory retirement age spelled out in the Act respecting municipal courts is unconstitutional because it infringes section 10 of the Quebec Charter of Human Rights and Freedoms and section 15 of the Canadian Charter. They also pointed out that judges of the Court of Quebec and justices of the peace can work beyond the age of 70, while federally-nominated judges can retire at the age of 75. The fact that they cannot is discriminatory, argued the two judges. They also asserted that being able to work beyond the age of 70 would ensure their financial security, one of the essential conditions behind judicial independence.

In a 57-page ruling that examines the mandatory retirement age of judges across the country, Justice Michel Yergeau held that his hands are tied. It is not up to the Court to arbitrarily set an age that is different from that determined by the provincial legislature, which in this case was established with the assistance of a Quebec judge’s organization, the Conférence des juges du Québec, ruled Justice Yergeau in Clément v. Québec (Attorney General) 2015 QCCS 2207. In fact, setting a mandatory retirement age for provincially-nominated judges is the “best-suited mechanism” to ensure the tenure of judges and to protect them from discretionary decisions by legislatures that could put their judicial independence in peril, noted Justice Yergeau.

Eliminating mandatory retirement for judges would inevitably lead to the establishment of a “complex evaluation process” that would examine their aptitudes and capacity to continue to work, added Justice Yergeau. Informed by guidance by the Supreme Court in Stoffman v. Vancouver General Hospital, [1990] 3 SCR 483, Justice Yergeau pointed out that such a program could have an invidious and “humiliating” effect, especially on seasoned professionals.

“If there was a superior authority that conducted an evaluation of the performance of judges, that would lead to a judicial system that would be under trusteeship,” remarked Tremblay. ”That would open a Pandora’s box, and would be an obstacle to judicial independence.”

Justice Yergeau also dismissed the judges’ arguments that the mandatory retirement age for municipal judges infringed section 10 of the Quebec Charter, which states that every person has a right to full and equal recognition and exercise of his human rights and freedoms, without distinction, exclusion or preference based on race, colour, sex or age, except as provided by law. “A distinction based on age, when it is provided by the law, is not discrimination under the Quebec Charter,” held Justice Yergeau.

Nor does the mandatory retirement age set out by the provincial legislature infringe section 15 of the Canadian Charter, concluded Justice Yergeau. He notes that the Supreme Court in Withler v. Canada (Attorney General), [2011] 1 SCR 396 held that equality is not about sameness, and that section 15(1) of the Canadian Charter does not protect a right to identical treatment. Instead it protects every person’s right to be free from discrimination. After applying the two-step test from the SCC in R. v. Kapp, [2008] 2 SCR 483 to determine whether there was discrimination under s.15 of the Canadian Charter, Justice Yergeau concluded that the mandatory retirement age of 70 years old for municipal judges does not create a disadvantage by perpetuating prejudice or stereotypes. “Article 39 of the Act respecting municipal courts is not intended to separate judges over the age of 70 from other judges and treat them worse,” said Justice Yergeau. “The only goal behind this legislative choice is the tenure of judges.”

Justice Yergeau was also not swayed by their argument that their financial security is in jeopardy because they cannot work beyond the age of 70. In Quebec, there are two types of municipal judges. Judges like Justice Clément who work in Montreal, Quebec City and Laval are employed as full-time judges and benefit from a pension plan. The others, like Paquin, work on a part-time basis, are paid per session, and can continue to practice as a lawyer even after having been named as a judge. While these judges do not have a pension plan or other benefits, they are financially compensated for the lack of benefits, points out Justice Yergeau.

According to former Quebec Superior Court Justice François Daviault, the case brought forth by the two municipal judges were “not impressive.” The two municipal judges failed to introduce witnesses or expert evidence to bolster their case, a shortcoming Justice Yergeau pointed out several times in the ruling. They also did not obtain the backing of other judge’s organizations, which did not help their case, said Daviault. “It’s very surprising that they did not introduce expert evidence,” said Daviault, now with Montreal law firm Lepage Carette. “I am convinced that if the two judges had arguments of some value then I believe they would have been supported by other judges. But nobody intervened.”

Officials charged with a public mandate hold responsibilities and face constraints, observed Pierre Issalys, a law professor at the Université Laval. “If at a social level one should encourage seniors to continue their professional activities if they want to and are capable of doing so, it is justified to impose limits on people charged with a public mandate, like judges, so long as it is reasonable,” said Issalys in an email. “As an aside, the plaintiffs were aware of the existence of the mandatory retirement age when they accepted to become municipal judges.”

Chantal Chatelain, a former Montreal lawyer who represented Court of Quebec judges before provincial judicial compensation committees and who is now a Quebec Superior Court judge, said in an email that the ruling is of significant importance because it highlights the “necessity of considering the particularities of judges’ functions and the need to offer judges adequate compensation which are aligned to the particular status of judicial office in order to satisfy the constitutional requirement of judicial independence.”

Law firms coming to grips with retirement issues

The figures are stark. It is estimated that nearly 70 per cent of law firm partners are “baby boomers,” according to Hildebrandt International, an international legal consulting firm. In the United States, the latest figures reveal that approximately 400,000 lawyers will reach retirement age at some point within the next decade. Nearly a third of California’s 170,000 active attorneys are older than 55, and 21 per cent older than 60. Closer to home, 8,284 of its 22,500 members are over the age of 50, according to the latest figures from the Barreau du Québec. In Ontario, a startling 42 per cent of lawyer licensees, for a total of 17,850, are over the age of 50, reveals a demographic breakdown from the Law Society of Upper Canada.

Yet though the median age in the profession has increased, with the youngest baby boomers expecting to reach the mid-50s and the oldest the early 70s by the year 2018, Canadian law firms are seemingly struggling to come to grips with the changing demographics and are slow, if not reluctant, to deal with retirement as a major firm issue, assert legal industry observers.

“It’s a sensitive issue,” remarked Jordan Furlong, a consultant with leading consultancy firm Edge International. “Most firms haven’t thought about it. They’ve been able to avoid it for many years, and now a lot of them are struggling with it. Retirement is a difficult subject for a lot of firms to tackle because it ties so closely with the question of future development of the firm.”

While in virtually all Canadian jurisdictions mandatory retirement is either prohibited or is permitted only if it is based on bona fide retirement or pension plans or bona fide occupational requirements, the terms of partnership agreements at many law firms, if not the majority of major Canadian law firms, include provisions that compel partners between the ages of 65 and 70 to step down or at the very least put an end to their equity association with the firm.

But a growing number of lawyers hitting the retirement age have no desire to hit the proverbial golf course. Indeed, a study by the legal management consulting firm Altman Weil revealed that the closer to retirement a lawyer gets, the more likely he is going to oppose mandatory retirement. Only 38 per cent of lawyers agree with the enforcement of mandatory retirement provisions in law firms. Further, 61 per cent of lawyers stated that they intend to continue working in some capacity after retirement, according the survey.

“There’s definitely a trend for people wanting to work longer,” observed Dal Bhathal, managing director, Eastern Canada, of the legal recruitment firm The Counsel Network. “People are living longer. They are living healthier lives, and many senior partners in their 60s are extremely fit.”

Though many older lawyers on the cusp of retirement have no wish to retire either because of client demands and the satisfaction which they derive from law practice, many also feel they have no choice but to continue to work because their nest eggs have shrunk dramatically thanks to the global financial crisis, points out Adam Pekarsky, founder and president of  Pekarsky Stein, a Calgary consultancy and recruiting agency for law firms. And that doesn’t seem to bode well for the rapidly maturing next generation of lawyers who are eagerly waiting for the ageing leadership to step aside so that they can play a more active role in running the law firm’s business.

“The whole issue revolves around providing oxygen to the next generation of lawyers coming up in law firms, who get frustrated and leave if the older guys don’t step aside in a timely fashion,” said Pekarsky. “It’s a generational issue, and a lot of it has to do with the economic downturn.”

The compensation model used by the overwhelming majority of law firms is in some ways to blame for the industry’s reluctance to grapple with the issue of retirement and its struggle with succession planning, a process that is supposed to ensure the smooth transition from the old guard to those waiting in the wings. With respected senior partners expected to contribute as much, if not more, than their younger colleagues, and the competition for professional status and compensation within firms as fierce even among the most senior partners, many partners approaching retirement age are reluctant to yield control of their practices, even though there may be whispers or concerns about their productivity.

“The whole question of retirement is bound with the question of success planning, and succession planning is just so hard for law firms,” noted Furlong. “Succession planning involves such things as mentoring younger lawyers, bringing them into the loop with clients and giving them independent access to clients – and that’s hard for lawyers to do because they’ve been taught to horde work, not share it.”

What’s more, law firms typically do not reward partners for “transitioning their practice,” points out Bhathal. On the contrary. Since law firms generally view a lawyer’s billings as a measure of their productivity, partners who want to phase down gradually more often than not pay the price as they become “an issue for the firm,” added Bhathal. “It goes back to the compensation system. It comes down to what they’re billing and what they’re producing.”

But there may be a shift underway in the Canadian legal landscape. Some law firms have begun to tackle the retirement issue by modifying their compensation arrangements to make for smoother succession planning. Some are handing a percentage of billings generated by a client to partners even after they have retired, so long as the retired partner has passed on the client to other partners and the client is still generating business. Other firms are using incentives, and providing lawyers who don’t wish to retire a percentage of the business they make while working at the office.

“At a certain stage, a lot of individuals are looking for a place to go to, stay connected to their network, and enjoy the trappings and resources of a large firm,” said Pekarsky. “By giving them a pure percentage of their receipts they can work as hard as they want to.”

While retirement and succession planning is not necessarily the “top item of the agenda” for most firms, Furlong believes that is about to change. Not that law firms have much of a choice.

“They will have to deal with a rapidly ageing leadership core and a rapidly maturing next generation of partners who would like to take a turn at the wheel,” said Furlong.