• U.S. Supreme Court Addresses Determination of Employee Under the ADA
  • May 16, 2003 | Author: Amy Wright Littrell
  • Law Firm: Ford & Harrison LLP - Tampa Office
  • Today, April 22, 2003, the U.S. Supreme Court issued a decision that may impact the determination of whether a business is covered by the Americans with Disabilities Act (ADA). In Clackamas Gastroenterology Associates v. Wells, the Court addressed the question of whether physicians, who were shareholders and directors of a professional corporation, should be considered employees when determining whether the employer is covered by the ADA. The Court held that the common-law element of control is the principle guidepost that should be followed in making this determination. The Court also adopted the guidelines set forth in the Equal Employment Opportunity Commission's Compliance Manual for determining when an individual is subject to an organization's control.

    The ADA applies to all employers that have fifteen or more employees for each working day in each of twenty or more calendar weeks in the current or preceding year. In Clackamas, an employee sued her employer, a professional corporation, claiming she was terminated in violation of the ADA. The employer asked the trial court to dismiss the case, claiming it did not have 15 employees and thus was not covered by the ADA. The trial court granted the request, noting that the doctors were more like partners in a partnership than shareholders in a general corporation and, therefore, were not employees for the purposes of federal antidiscrimination laws. The employee appealed to the U.S. Court of Appeals for the Ninth Circuit. The Ninth Circuit reversed, holding that there was no reason to permit a professional corporation to secure the "best of both possible worlds" by allowing it to assert corporate status for tax and civil liability advantages and yet argue it is like a partnership to avoid liability for unlawful employment discrimination.

    The Supreme Court granted certiorari to resolve the conflict among the Circuit courts, noting that the disagreement among the Circuits regarding the definition of employee is not confined to the ADA, but also includes Title VII and the Age Discrimination in Employment Act (ADEA). The Court noted that the ADA's definition of employee as an individual who is employed by the employer is completely circular and explains nothing. Accordingly, the Court determined that it should look to common law for guidance in determining whether the doctors were employees. The Court rejected the employer's argument that the determination should be based on whether the shareholder-director doctors were the functional equivalent of a partner. The Court noted that today there are partnerships that include hundreds of members some of whom may well qualify as employees because control is concentrated in a small number of managing partners.

    The Court also noted that professional corporations are relatively young participants in the market and their features vary from state to state. Nevertheless, the Court found that the common-law definition of the master-servant relationship provides helpful guidance. Specifically, the Court focused on the master's control over the servant and held that the common-law element of control is the principle guidepost that should be followed in this case. The Court was persuaded by the EEOC's focus on the common-law touchstone of control - specifically its submission that each of the following six factors is relevant to the inquiry of whether a shareholder-director is an employee:

    • Whether the organization can hire or fire the individual or set the rules and regulations of the individual's work;

    • Whether and, if so, to what extent the organization supervises the individual's work;

    • Whether the individual reports to someone higher in the organization;

    • Whether and, if so, to what extent the individual is able to influence the organization;

    • Whether the parties intended that the individual be an employee, as expressed in written agreements or contracts; and

    • Whether the individual shares in the profits, losses, and liabilities of the organization.

    The Court noted that a person's title as partner, director, or vice-president should not necessarily be used to determine whether he or she is an employee or a proprietor, nor should the mere existence of an employment agreement be determinative. Instead, the Court held that the answer to whether a shareholder-director is an employee depends on all of the incidents of the relationship with no one factor being decisive.

    The Court reversed and remanded the case for determination in accordance with EEOC standard that it adopted.