Yaworski, a former income (non-equity) partner at Gowlings, launched legal action against the firm in 2011 seeking compensation for services provided in 2008 and 2009.
Employment lawyer Nadine Côté says she’s seeing a trend of more law firms hiring income partners.
“The traditional equity partner sometimes is viewed as somebody who needs to be a revenue generator and develop new clients, which can be really time-consuming,” she tells Legal Feeds. “Some lawyers prefer not to have that responsibility along with the responsibility of investing into the firm.”
In April 2004, Yaworski — through his professional corporation Yaworski PC — became an income partner at Gowlings until January 2006. Yaworski’s agreement with the firm stated that Yaworski PC would be paid a set annual compensation and a bonus based on performance. It also contained a clause indicating all disputes between the firm and income partners were subject to arbitration.
In addition, the agreement said if Yaworski PC wasn’t made a full partner by the end of its term, then the agreement wouldn’t terminate. Yaworski went on to work for Gowlings for three more years but was never made a full partner.
An agreement was reached in 2008 between Gowlings and Yaworski PC for 2006 and 2007, but there was no agreement for additional or bonus compensation for 2008 and 2009.
After leaving Gowlings in February 2009, Yaworski filed a statement of claim, arguing neither he nor Yaworski PC were subject to the arbitration clause in the 2008 partnership agreement.
Gowlings was granted a stay of the legal action pending the result of the arbitration. Yaworski appealed, arguing that after December 2005 Gowlings was dealing with Yaworski rather than his professional corporation, which he claimed was evident by e-mails sent to Yaworski and not his professional corporation.
In dismissing his appeal, the Alberta Court of Appeal said the address on the e-mails didn’t prove anything since Yaworski had always represented Yaworski PC.
“The address on an email in these circumstances would hardly override the terms of a written contract,” wrote Justice Bryan E. Mahoney in the ruling.
The court also addressed the dispute over the arbitration clause in the agreement: “The correct reading is that the agreement continued but would be subject to whatever new, amended or additional terms were agreed on. Since no new, amended, or additional terms were agreed to, the existing terms simply continued. Included in those existing terms was the agreement by both Gowlings and Yaworski PC to submit to arbitration.”
Côté says law firms can protect themselves by clarifying the terms of the agreement.
“If the intention is that the amount beyond the initial salary be discretionary, then that language needs to be in there. If there’s going to be a targeted amount of compensation for a targeted performance, then that language needs to be in there,” she says.
“So one of the best ways of avoiding disputes is just clarifying parties’ expectations at the outset, whatever those expectations may be. If everybody comes to the ballpark with the same understanding of what their roles are, it can reduce conflict later on.”
Update 2:20 pm: Quotes from Nadine Côté added.