Of Partners And Employees

In Clackamas Gastroenterology Assocs., P.C. v. Wells, 538 U.S. 440 (2003), the Supreme Court shed some light on the issue when it considered whether four physician-shareholders practicing in a professional corporation were “employees” for purposes of the Americans with Disabilities Act's 15-employee threshold. The Court noted that professional corporations present “a new type of business entity that has no exact precedent in the common law,” but that “the common law's definition of the master-servant relationship does provide helpful guidance.” Id. at 447-48. Drawing from the common law definition of the term “servant” as one “whose work is controlled or is subject to the right to control by the master,” the Court held that “employee” status should turn on “whether shareholder-directors operate independently and manage the business or instead are subject to the firm's control.” Id. at 448 (quotations and citations omitted). Rejecting a categorical approach, the Court endorsed a multi-factor test suggested by the EEOC and framed in terms of the following inquiries:

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

Id. at 449-50 (quoting 2 EEOC Compliance Manual '605:0009 (2000)).

Presence of the first three factors ' which assess the organization's control over the individual's work ' weigh in favor of employee status, while the fourth factor ' the individual's ability to control the entity's business ' can be viewed as the converse of the first three. In contrast, the sixth factor ' participation in profits and losses ' is a typical indicia of ownership that supports a finding of “master” or non-employee status. The fifth factor ' intent of the parties ' may support either conclusion, but may also be considered less significant if not consistent with the “realities” of the position. (“The mere fact that a person has a particular title ' such as partner, director, or vice president ' should not necessarily be used to determine whether he or she is an employee or a proprietor.” Id. at 450; see also, Devine v. Stone, Leyton & Gershman, P.C., 100 F.3d 78, 81 (8th Cir. 1996) (one “may not avoid Title VII by affixing a label to a person that does not capture the substance of the employment relationship”)).