The Equal Employment Opportunity Commission is reportedly pressing PricewaterhouseCoopers and other major accounting firms to drop their longstanding mandatory retirement age policies, and the American Institute of CPAs is asking them to stop.
The Wall Street Journal reported earlier this month that the EEOC’s Chicago office is asking PwC to eliminate its mandatory retirement age of 60 for partners and principals. A 1967 law, the Age Discrimination in Employment Act, prohibits mandatory retirement ages for employees at most types of businesses, but partnerships such as accounting firms are typically exempted on the theory that business owners can’t discriminate against themselves.
A mandatory retirement age policy has been in place at PwC’s pre-merger predecessor firms Price Waterhouse and Coopers & Lybrand since the 1960s, according to the WSJ, but the EEOC did not begin prodding PwC to change the policy until 2010. The firm asked the EEOC to clarify its concerns in January of this year, and the agency responded by merely describing a six-part test from a 2003 decision by the Supreme Court in a case known as Clackamas Gastroenterology v. Wells to determine who qualifies as an employee in a partnership.
PwC’s attorneys were already well aware of the Clackamas test and asked the EEOC for the opportunity to work out a proposal to address the agency’s concerns. But the EEOC reportedly broke off negotiations with the firm and is considering the possibility of suing PwC to change its mandatory retirement policy.
The EEOC is reportedly looking at Deloitte and KPMG as well, and that is raising worries in the CPA profession that it may begin pressuring the accounting profession at large to drop mandatory retirement age policies, which have traditionally enabled younger members of the firms to advance in their careers and eventually make partner.
In a letter to members of the EEOC, the AICPA has expressed concern that a significant expansion of the Age Discrimination in Employment Act would be detrimental to the accounting profession and respectfully requested that the EEOC decline to continue on this path.
In a June 25 letter from AICPA president and CEO Barry C. Melancon, the Institute wrote, “We do not dispute that hundreds of thousands of non-partner employees are appropriately covered by the ADEA. However, we believe that accounting firm partners (those who own and control a portion of each firm) are not covered by the ADEA, and we do not believe they should be under consideration, as the possible action contends. Our position is consistent with—and relies upon—longstanding EEOC policy that presumes that partners are not ‘employees’ for purposes of anti-discrimination laws. A change that treats accounting firm partners as ‘employees’ would upend the long-established expectations and business reliance interests of the accounting profession.”
“Accounting firms have structured their partners’ compensation, capital contributions, buyouts, pensions, agreed-upon retirement dates, deferred compensation, voting rights, benefits, governance, and termination policies in reliance on the specific understandings evidenced by partnership agreements,” Melancon pointed out. “In particular, retirement policy provisions allow for the predictable progression of lesser tenured individuals into the partnership, and facilitate the orderly transition of a firm’s clients from senior partners to junior partners.”
“As the EEOC considers whether to expand the ADEA’s scope, we hope you will maintain the flexibility that allows CPAs to organize themselves and plan their succession as they see fit within the bounds of the existing law,” the AICPA letter concluded.