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In a decision that could have implications for other cases pitting partners against their own firms, a federal appeals court ruled Tuesday that law firm partners are not considered employees under the Age Discrimination in Employment Act.

In reaching its decision, the U.S. Court of Appeals for the Eighth Circuit upheld the dismissal of Joseph von Kaenel's age discrimination claim against Armstrong Teasdale, which had forced the equity partner to retire in 2014 when he turned 70.

Determining whether a law firm partner like von Kaenel was an "employee" under the ADEA was a matter of first impression for the appeals court, the Eighth Circuit noted.

Relying on the U.S. Supreme Court's 2003 decision in Clackamas Gastroenterology Associates v. Wells, which dealt with shareholder-director physicians, the panel held that, as an equity partner at Armstrong Teasdale, von Kaenel received a portion of the firm's profits, voted to make changes the firm's partnership structure, and could only be expelled from the firm through a partner vote or the mandatory retirement provision.

"Consistent with the manner in which the term 'employee' has been interpreted under federal anti-discrimination laws, we conclude von Kaenel was not an employee of the firm and, therefore, is not covered by the ADEA," Judge Ralph Erickson of the U.S. Court of Appeals for the Eighth Circuit wrote for the appellate panel.

Neal Perryman, a member of Lewis Rice in St. Louis who represented Armstrong Teasdale, said they're "pleased with the Eighth Circuit's ruling in this matter of first impression in this circuit, and the court's unambiguous holding that equity partners like Mr. von Kaenel are not 'employees' entitled to protection under the ADEA."

The question of whether equity partners are employees under the ADEA comes as firms grapple with both an aging workforce and complaints about gender discrimination. Nearly half of Am Law 200 partners were over the age of 52 in 2016, according to an ALM analysis.

Gender discrimination lawsuits filed against Proskauer Rose and Chadbourne & Parke in 2017 also raised similar questions about whether equity partners were considered employees under the Equal Pay Act and Title VII of the Civil Rights Act. The firms argued they weren't because the plaintiffs were part-owners at the time.

The lawsuits against Proskauer and Chadbourne (which was absorbed by Norton Rose Fulbright) settled in 2018 before the federal judges hearing those cases decided the employee standing issue. In reaching its decision on von Kaenel's claims, the Eighth Circuit cited rulings from other federal appellate courts involving partners in accounting and medical businesses.

In those cases, the Seventh, Tenth and Eleventh Circuits all ruled that those partners or shareholder-directors were not considered employees under the ADEA.

Perryman declined to speculate on how the Eighth Circuit's decision on von Kaenel's lawsuit would impact other cases or firms with mandatory retirement policies. However, "the law is settled, at least in this circuit, that equity partners cannot enjoy both the benefits of the partnership agreement to which they are a party and also the benefits of laws designed for the protection of employees," he said.

Von Kaenel began working at Armstrong Teasdale in 1972 and became a partner six years later. When he was forced out at the end of 2014, von Kaenel first sued the firm in Missouri state court, alleging a violation of the Missouri Human Rights Act.

A judge in Cole County Circuit Court held that von Kaenel was also not an employee under the MHRA. U.S. District Judge Henry Edward Autrey of the Eastern District of Missouri cited the Cole County decision when he ruled against von Kaenel in 2018.

Armstrong Teasdale was also represented by Michael Jente of Lewis Rice. Von Kaenel was represented by Jerome Dobson and Gregory Rich of Dobson, Goldberg, Berns & Rich. They did not respond to requests for comment as of press time.

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