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Equity partner at law firm wasn't protected from mandatory retirement by federal age bias law, 8th Circuit rules

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An equity partner at Armstrong Teasdale can’t sue under the Age Discrimination in Employment Act for his ouster under a mandatory retirement policy, a federal appeals court has ruled.

The St. Louis-based 8th U.S. Circuit Court of Appeals ruled Tuesday that equity partner Joseph von Kaenel wasn’t a law firm employee and, as a result, he wasn’t covered by the federal age bias law.

Von Kaenel began working as an attorney at Armstrong Teasdale in 1972. He left at the end of 2014 under a policy that requires partners to retire at the end of the year in which they reach age 70, unless the managing partner allows an exception.

Von Kaenel said he would have retired at age 75 if the retirement policy had not forced him to leave.

The 8th Circuit said Von Kaenel had responsibilities and authority at the firm that would not be given to employees. “We find that von Kaenel’s role as equity partner at Armstrong Teasdale was not simply a title that carried no legal significance,” the court said., Bloomberg Law and Law360 have coverage.

The 8th Circuit said the issue of who qualifies as an employee under the federal age discrimination law was an issue of first impression in the circuit. Other federal appeals courts have found that physician and accounting firm shareholders were not employees covered under the law when they had authority to manage or an ownership interest in their firms.

Those circuits were the Chicago-based 7th U.S. Circuit Court of Appeals, the Atlanta-based 11th U.S. Circuit Court of Appeals and the Denver-based 10th U.S. Circuit Court of Appeals.

The issue of employee status has been raised in lawsuits against other law firms under the Equal Pay Act and Title VII of the Civil Rights Act, points out. Lawsuits against Proskauer and Chadbourne settled before a ruling on the question.

Judge Ralph Erickson, an appointee of President Donald Trump, wrote the opinion for the 8th Circuit panel. Erickson was previously a federal district judge who was appointed by President George W. Bush.

In deciding Von Kaenel’s status, the 8th Circuit looked to factors established by the U.S. Supreme Court in the 2003 decision Clackamas Gastroenterology Associates v. Wells. That case considered whether a physician shareholder was an employee entitled to sue.

The factors included (1) whether the organization can hire or fire the individual or set rules for the person’s work; (2) whether and to what extent the organization supervises the individual’s work; (3) whether the individual reports to someone higher in the organization; (4) whether and to what extent the individual is able to influence the organization; (5) whether the parties intended the individual to be an employee, as expressed in written agreements; and (6) whether the individual shares in the profits and losses of the organization.

Von Kaenel was a partner under those standards, the 8th Circuit said.

Von Kaenel made a capital contribution and signed a partnership agreement when he became a partner. He had the right to vote on changes to the partnership agreement, including its mandatory retirement provisions. He benefited from the firm’s profits and was disadvantaged by losses, though his compensation was determined through “a complicated calculation.”

He had the right to vote on the admission of new partners. His health insurance premiums and 401k contributions were deducted from his compensation. Practice group leaders did not review his work. Though other members of the firm set lawyers’ hourly rates, the one time he sought a reduction for a client it was granted. After Von Kaenel became an equity partner, he could only be ousted by a partnership vote or due to the mandatory retirement policy.

Von Kaenel was not an employee “if we peer beneath the title and probe the actual circumstances of Von Kaenel’s relationship with the firm,” the appeals court said.

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