Never one to shy away from an opportunity to condemn the actions of any government agency, the Wall Street Journal Opinion Page came to a rousing defense of PwC, who is taking a bit of heat from the Equal Employment Opportunity Commission over their mandatory retirement age.
The story starts in May 2010, when the EEOC's Chicago office, headed by long-time chief John Rowe, started peppering accountancy PricewaterhouseCoopers with demands to eliminate its mandatory retirement age of 60 for partners and principals (who are the equivalent of partners but non-accountants).The EEOC has never liked mandatory retirement ages, and the agency's Chicago office has a reputation for testing the boundaries of the law. In this case, the law has been on the books for almost a half-century.The 1967 Age Discrimination in Employment Act prohibits mandatory retirement ages for employees, but business owners are exempt on the logical grounds that they can't discriminate against themselves. So long as PwC's partners share in the risk of the business and aren't acting like employees, they are exempt from federal antidiscrimination law.
If this sounds kinda sorta familiar, the DC Court of Appeals let an age discrimination lawsuit against PwC go forward in February 2010. It was brought by two guys who claimed they weren't admitted to the partnership because of how close they were to the retirement age. The timing of EEOC's questioning relative to that decision seems to work but a spokesperson at PwC told me the two situations aren't connected.
Regardless, the rules of the ADEA are pretty logical. Individuals that hold partnerships interests are, in fact, owners. Putting a different spin on the Journal's article — if they want to discriminate against themselves, they can. But just in case the partners/owners are doing too many non-partner/owner things, the Journal cites a Supreme Court case, Clackamas Gastroenterology v. Wells, that listed a six-part test to determine who qualifies as an employee. Here they are:
"Whether the organization can hire or fire the individual or set the rules and regulations of the individual's work"Whether and, if so, to what extent the organization supervises the individual's work"Whether the individual reports to someone higher in the organization"Whether and, if so, to what extent the individual is able to influence the organization"Whether the parties intended that the individual be an employee, as expressed in written agreements or contracts"Whether the individual shares in the profits, losses, and liabilities of the organization."
Now, I suppose you could argue that partners can be hired and fired, but they aren't hired and fired like regular employees. A good example of this is when ex-KPMG partner Scott London was "separated" from the firm. Legally speaking, he wasn't fired. In the world where non-lawyer people live and don't give a shit about legalese, he was fired. I suppose, also, you could say that a partner's work is reviewed, but that's to comply with professional and regulatory standards in the same sense that associates or managers' work is reviewed.
Partners can influence the organization because, for example, they choose the executive leadership. Partners are not intended to be employees, they are intended to be partners/owners, in part, so they share in the profits/losses/liabilities and make business decisions for the organization as a whole.
Yeah, this all seems a little silly, doesn't it?
So that's why it's understandable that PwC was a little confused about the EEOC's beef with their mandatory retirement age, especially since they had them in place for decades. What gives, they wanted to know? You might think that if you were to find yourself in such a position, the prudent thing to do would be to ask. PwC did that. They did not get much of a response:
When PwC asked the EEOC's Chicago office to clarify its concerns, the agency declined to explain and merely read the Clackamas tests out loud, hoping the company would settle. PwC's lawyers replied in a January 2013 letter that this tactic "does not, in our view, satisfy the agency's obligations to conciliate" and "deprived us of the ability to formulate a proposal to address your concerns." PwC also offered to put the mandatory retirement age up for another partner vote. Two days later, [Chicago EEOC chief John] Rowe terminated the negotiation.
I'm told that this "I'll read them slowly to you" encounter occurred at an in-person meeting, which makes it all the more awesome.
The Journal, of course, wants to make this about government interference with the private sector. The editorial states that KPMG and Deloitte are getting looked at too, but perhaps the real lesson here is that even faceless companies appreciate some tact. Even just a little.
