Clackamas Gastroenterology Associates, P. C. v. Wells
2003 U.S. LEXIS 3240, 538 U.S. 440, 155 L. Ed. 2d 615 (2003)
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Rule of Law:
The determination of whether a shareholder-director of a professional corporation is an 'employee' under the Americans with Disabilities Act (ADA) depends on a common-law analysis of the master-servant relationship, with the principal guidepost being the degree of control the organization exercises over the individual.
Facts:
- Clackamas Gastroenterology Associates, P. C., is a medical clinic in Oregon organized as a professional corporation.
- The clinic is owned and managed by four physicians who are shareholders and also serve as the board of directors.
- These four physician-shareholders actively practice medicine as part of the clinic's operations.
- Deborah Anne Wells worked as a bookkeeper for the clinic from 1986 until 1997.
- After her termination, Wells alleged that the clinic had discriminated against her based on a disability.
- The clinic employed fewer than 15 individuals, the statutory minimum for ADA coverage, unless the four physician-shareholders were counted as 'employees'.
Procedural Posture:
- Deborah Anne Wells filed suit against Clackamas Gastroenterology Associates, P. C. in the U.S. District Court, alleging a violation of the Americans with Disabilities Act (ADA).
- Clackamas moved for summary judgment, arguing it was not a covered employer under the ADA because it had fewer than 15 employees.
- The District Court granted summary judgment for Clackamas, finding that the four physician-shareholders were analogous to partners and not employees.
- Wells appealed the decision to the U.S. Court of Appeals for the Ninth Circuit.
- A divided panel of the Ninth Circuit reversed the District Court, holding that the clinic's decision to incorporate legally prevented the shareholders from being treated as partners for ADA purposes.
- The U.S. Supreme Court granted certiorari to resolve a conflict among the circuit courts.
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Issue:
Should courts determine if a shareholder-director of a professional corporation is an 'employee' under the ADA by using the common-law element of control, or by virtue of the business's corporate form?
Opinions:
Majority - Justice Stevens
Yes, courts should use the common-law element of control. The determination of whether a shareholder-director is an 'employee' under the ADA must be based on the common-law element of control, not merely on the business's corporate structure. Because the ADA's definition of 'employee' is circular, courts must look to the traditional common-law master-servant relationship, where the master's control over the servant is the key factor. The Court rejected both the petitioner's argument to treat the physicians as 'partners' and the appellate court's view that the corporate form was dispositive. Instead, it adopted the EEOC's six-factor test, which provides a framework for analyzing control by asking: (1) Can the organization hire/fire the individual or set work rules? (2) Does the organization supervise the work? (3) Does the individual report to someone higher? (4) Can the individual influence the organization? (5) Do contracts express an intent for an employment relationship? (6) Does the individual share in profits, losses, and liabilities? This fact-specific inquiry properly balances the ADA's remedial purpose with Congress's intent to exempt very small firms.
Dissenting - Justice Ginsburg
Yes, courts should use the common-law test, but the inquiry should be broader than just control and should consider the totality of circumstances. The physician-shareholders function as common-law employees in their daily work as doctors for the corporation; they have employment contracts, receive salaries, and are subject to the clinic's standards. The doctors deliberately chose the corporate form to gain benefits available to 'employees' under other statutes like ERISA and state workers' compensation, and they should not be permitted to disavow that status to evade anti-discrimination laws. The majority's control-focused test creates uncertainty and allows coverage to depend on ownership structures rather than the actual size of the enterprise, undermining the ADA's goal of protecting vulnerable workers like the bookkeeper in this case. The dissent would apply a broader common-law analysis that considers all aspects of the employment relationship, not just control.
Analysis:
This decision establishes a uniform, fact-intensive standard for determining 'employee' status for owners of professional corporations under federal anti-discrimination statutes like the ADA, Title VII, and the ADEA. By rejecting a bright-line rule based on corporate form, the Court requires a case-by-case analysis of the actual power dynamics and control within a firm. This creates more flexibility but also introduces uncertainty for small professional practices, which must now carefully assess their governance structures to determine their legal obligations. The case solidifies the 'right-to-control' test as the primary analytical tool in this context, ensuring that substance (control) prevails over form (corporate status or title).
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