The American Institute of CPAs has asked the Equal Employment Opportunity Commission to reject appeals by EEOC staff to investigate and litigate against accounting firms about their mandatory partner retirement provisions, saying in a letter Monday that the classification of partners as employees would be disruptive to the accounting profession and its business practices.
The controversy stems from efforts by the EEOC’s general counsel to challenge the mandatory partner retirement policies at PricewaterhouseCoopers last year and Deloitte this year. The issue emerged during testimony by Deloitte’s general counsel, William Lloyd, at a congressional hearing last month (see Deloitte Defends Partner Retirement Policy). The AICPA wrote to the EEOC about the matter last year when PwC’s policies came under scrutiny (see Concern Mounts about Mandatory Retirement Age Policies at Accounting Firms).
In the new letter, which AICPA president and CEO Barry Melancon sent on October 20, he wrote, “We understand that the EEOC staff is currently investigating and considering litigation against accounting firms regarding the partner retirement provisions in their partnership agreements. You will recall that less than eighteen months ago, the EEOC staff completed a similar investigation of another large accounting firm. As the EEOC General Counsel’s office wrote in its July 25, 2013 informal comment letter, control—meaning whether partners control their own work and own and control a portion of their firms—is the touchstone to the determination that they are indeed partners rather than employees. Because of the nature of the accounting profession, we believe that the partners of our member firms—like the firms the staff is investigating—do have such control and that the EEOC should not bring actions against these firms.”
The AICPA is encouraging EEOC commissioners to exercise their authority to reject any attempt by the general counsel to file litigation with respect to accounting partnership retirement practices. In addition, the AICPA is requesting that commissioners direct the EEOC staff and general counsel to “stop these unwarranted and unnecessary investigations of accounting firm partnerships and utilize the Commission’s resources in a more productive manner that will address actual discrimination practices.”
The AICPA also contended that changing the definition of partners to employees would disrupt the accounting profession’s business practices.
“We believe that any change in the EEOC’s classification of accounting firm partners to employees’ for the purposes of anti-discrimination laws would be very disruptive to the accounting profession and its business practices,” Melancon wrote. “A change that treats accounting firm partners as employees’ would upend the long-established expectations and business reliance interests of the accounting profession. The members of our profession possess a high degree of business expertise. Those individuals have full knowledge and understanding of the compensation, capital contributions, buyouts, pensions, deferred compensation, voting rights, benefits, governance, termination policies, as well as mandatory retirement provisions, and agree to those terms when signing their firm’s partnership agreement. Further, individuals have the option of choosing to remain employees rather than becoming partners.”
The AICPA argued that accounting firms and their partners have adopted these policies for sound business reasons, including succession planning. “This business model has thrived and prospered for decades while also serving the public interest,” Melancon wrote. “In particular, retirement policy provisions allow for the predictable progression of lesser tenured, and often more diverse, individuals into the partnership, and facilitate the orderly transition of a firm’s clients from senior partners to those who will succeed them.”
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