AICPA Asks EEOC to Leave Mandatory Retirement Policies Intact

October 22, 2014 (PLANPSONSOR.com) - The American Institute of Certified Public Accountants (AICPA) has asked the Equal Employment Opportunity Commission (EEOC) to reject staff appeals to investigate and litigate against accounting firms regarding partner retirement provisions.

The AICPA is encouraging the agency’s commissioners to exercise their authority to reject any attempt by the general counsel to file litigation with respect to accounting partnership retirement practices. Further, the institute 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.”

In a letter to EEOC commissioners, AICPA President and CEO Barry Melancon, explained, “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.”

Get more!  Sign up for PLANSPONSOR newsletters.

According to the Wall Street Journal, the EEOC investigated PricewaterhouseCoopers LLP over its policy that requires its partners to retire by age 60, with a view toward whether the policy constitutes age discrimination. The Journal said the EEOC ultimately decided last year not to bring a case against PwC and closed its investigation, according to a person familiar with the situation.

Deloitte LLP has reported it is under EEOC investigation over its required partner retirement age of 62.

In its letter, the AICPA said it understands the EEOC is seeking to expand the scope of the Age Discrimination in Employment Act (ADEA) by requiring that partners in such firms be treated as “employees” for purposes of the ADEA.

Melancon wrote, “The AICPA represents CPAs in the more than 11,000 U.S. accounting firms that almost exclusively operate as partnerships, as generally required under state accountancy statutes. Importantly, the public interest is protected by these statutes and the related AICPA Code of Conduct provisions that require that accounting firm owners also be actively engaged in the firm. Appropriately, hundreds of thousands of non-partner employees are covered by the ADEA. Accounting firm partners, as owners, however, are not covered by the ADEA, and we do not believe such partners should be considered employees, as the EEOC staff is apparently asserting.

“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. 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, buy outs, 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.

“Accounting firms and their partners have adopted these policies for sound business reasons. This business model has thrived and prospered for decades while also serving the public interest. 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.”

In 2000, the EEOC initiated an investigation into a large law firm’s alleged practice of requiring partners to retire at age 65. The law firm eventually settled the EEOC’s charges.

«