Robert A. Mariotti, Sr. v. Mariotti Bldg Products
2013 WL 1789440, 118 Fair Empl. Prac. Cas. (BNA) 224, 714 F.3d 761 (2013)
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Rule of Law:
The six-factor test established in Clackamas Gastroenterology Associates, P.C. v. Wells to determine whether a shareholder-director is an 'employee' under the Americans with Disabilities Act (ADA) also applies to claims brought under Title VII of the Civil Rights Act of 1964, regardless of whether the business is a professional corporation or a closely held corporation.
Facts:
- Robert A. Mariotti, Sr. was a founder, shareholder, vice-president, secretary, and board member of Mariotti Building Products, Inc. (MBP), a closely held family business he helped build with his father and brothers.
- Mariotti and his brothers were employed pursuant to an agreement that allegedly provided for termination only for cause.
- In 1995, Mariotti had a 'spiritual awakening,' which he claims led to a 'systematic pattern of antagonism' and harassment from other MBP officers, directors, and employees because of his religious affiliation.
- In early January 2009, after the death of the family patriarch, Mariotti delivered a eulogy that included comments about his faith.
- On January 8, 2009, the other shareholders of MBP convened a meeting in Mariotti's absence and unanimously voted to terminate his employment.
- Mariotti received written notice of his termination on January 10, 2009.
- Despite his employment termination, Mariotti continued to serve as a member of MBP's board of directors until August 6, 2009.
- The termination letter stated that Mariotti's 'share of any draws from the corporation or other entities will continue to be distributed to you.'
Procedural Posture:
- Robert A. Mariotti, Sr. filed a charge of religious discrimination with the Equal Employment Opportunity Commission (EEOC).
- Mariotti then filed a lawsuit against Mariotti Building Products, Inc. (MBP) in the U.S. District Court for the Middle District of Pennsylvania, asserting Title VII claims and state law claims.
- MBP filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), arguing that Mariotti was an employer, not an 'employee' protected by Title VII.
- After Mariotti filed an amended complaint, MBP filed a second motion to dismiss on the same grounds.
- The District Court granted MBP's motion to dismiss the Title VII claims, concluding Mariotti was not an 'employee' under the statute, and declined to exercise jurisdiction over the state law claims.
- Mariotti (Appellant) appealed the dismissal to the U.S. Court of Appeals for the Third Circuit.
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Issue:
Does the multi-factor test established in Clackamas for determining if a shareholder-director is an 'employee' under the ADA apply to a shareholder-director of a closely held corporation bringing a religious discrimination claim under Title VII?
Opinions:
Majority - Smith, Circuit Judge
Yes. The test from Clackamas for determining 'employee' status applies to Title VII claims involving closely held corporations. Because the definition of 'employee' is virtually identical in both the ADA and Title VII, the Supreme Court's analysis in Clackamas, which is grounded in the common-law element of control, is the principal guidepost. The court reasoned that the form of the business entity is not dispositive; rather, the determination depends on 'all the incidents of the relationship.' Applying the Clackamas factors, the court found that Mariotti's status as a shareholder, director, and officer afforded him substantial authority and the right to participate in the management and governance of the corporation. His continued service on the board and his right to receive corporate draws after his termination further demonstrated that he was not the kind of person the common law would consider an 'employee,' but was instead an owner/employer not entitled to Title VII's protections.
Analysis:
This decision solidifies the application of the Clackamas 'control' test as the uniform standard for determining 'employee' status for owners and directors across major federal anti-discrimination statutes. By extending the test from the ADA/professional corporation context to the Title VII/closely held corporation context, the court emphasized that substance trumps form. The ruling clarifies that individuals who wield significant control and share in the ownership of a business are generally considered employers, not employees, for the purposes of these statutes. This precedent makes it significantly more difficult for partners, major shareholders, and directors in closely-held businesses to bring federal discrimination claims against their own companies.
