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Statute Does Not Define “Employee”
Court Rules on Definition, Not on Doctors’ Status
Court Preserves Intent to Limit ADA Coverage
A recent Supreme Court case validates the
EEOC’s process for
determining who is considered an employee under the ADA. The ruling
is significant for partnerships and small professional corporations
concerned about coverage under federal discrimination laws.
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The Supreme Court delivered a minor victory to both the
Equal
Employment Opportunity Commission (EEOC) and certain small employers
when it upheld the agency’s interpretation of who is counted as an
employee under the Americans with Disabilities Act (ADA). In
Clackamas Gastroenterology Associates v. Wells, 123 S. Ct. 1673
(April 22, 2003), the Court was asked to decide what test should be
applied to determine whether four physicians are employees and,
therefore, would trigger the ADA’s 15-employee coverage threshold.
The EEOC was not a party to the case, but the Court relied on its
guidelines for determining employee status.
A former employee sued a medical practice for disability
discrimination, and the doctors argued that their practice was not
covered by the ADA because it had fewer than 15 employees. The
doctors claimed that they should not be counted as employees
because, while they were actively engaged in the practice of
medicine, they also served as shareholders and directors of their
medical professional corporation.
The Court found that the correct analysis for employee status is the
common law test that measures the “extent of control” an
organization exerts over a worker. This approach is the cornerstone
of the six-point test advocated by the EEOC in its Compliance
Manual. (The Compliance Manual is issued to
EEOC investigators, but
also serves a dual purpose to help employers understand their
obligations.)
The decision likely will have a broader impact beyond just the ADA
employee definition. The EEOC Compliance Manual is used by the
agency to enforce all of the federal discrimination laws, not just
the ADA. So, the Court’s decision may be applied in determining
employee counts involving other federal laws, such as Title VII of
the Civil Rights Act (Title VII) and the Age Discrimination in
Employment Act (ADEA).
Statute Does Not
Define “Employee”
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The question of who is an employee under the ADA is an issue because
the statute itself does not define the term. It states only that an
employee is “an individual employed by an employer,” which is, as
the Court points out, a decidedly circular and unhelpful definition.
The Court looked to common law for guidance and, in particular,
focused on the employer’s right to control the worker as the
“principal guidepost” that should be used to determine the worker’s
status. The more control the organization exercises over an
individual, the more likely the worker is an employee.
According to the Court, the EEOC Compliance Manual also advocates
the “right to control” standard in its six-point employee status
test. Specifically, the EEOC Manual lists six factors its
investigators should consider to determine “whether the individual
acts independently and participates in managing the organization, or
whether the individual is subject to the organization’s control.”
The six factors include:
1. The organization’s ability to hire or fire the individual or set
the rules and regulations of the individual’s work.
2. The extent to which the organization supervises the individual’s
work.
3. The individual’s obligation to report to a higher authority in
the organization.
4. The extent to which the individual influences the organization.
5. The intent of the parties to create an employee/employer
relationship, as expressed in a written agreement or contract.
6. The opportunity for the individual to share in the organization’s
profits, losses, and liabilities.
In endorsing the EEOC’s guidelines, the Court also emphasized that
no one factor by itself is determinative or conclusive. Instead, you
must weigh all of the elements of the relationship. Thus, the fact
that a document exists that is titled “employment agreement” does
not mean that the individual is an employee. Similarly, titles (such
as partner or director) are not necessarily indicative of the
person’s actual responsibilities.
Court
Rules on Definition, Not on Doctors’ Status
As is often the situation in Supreme Court decisions, the Court
ruled only on the narrow issue presented in the case, namely what
factors should be used to determine who is an employee. It did not
actually decide if the doctors in question were employees, but it
did provide some guidance. Specifically, it indicated that there was
evidence that the physicians were not employees, including the fact
that they controlled the operation of their clinic, shared the
profits, and were personally liable for malpractice claims. However,
at the same time, the Court did suggest in a footnote that there
might be evidence supporting employee status. It cited the payment
of salaries to the doctors and the requirements that they must both
comply with the standards established by the clinic and report to a
personnel manager. So, after making these observations, the Court
ordered the Ninth Circuit to reconsider the case using the EEOC’s
standard.
Court
Preserves Intent to Limit ADA Coverage
The question of ADA coverage is an important one for countless small
businesses, particularly physician and other professional practices
that are incorporated mainly to avoid tax and civil liability. The
requirements of the ADA, including its nondiscrimination and
accommodation provisions, can be onerous even for large employers.
Congress specifically excluded employers with fewer than 15
employees in recognition of this burden. Fortunately for these small
employers, the Court’s decision maintains that exemption. And, it
now supports a relatively simple test to determine if
shareholder-partners are considered employees. This test will most
likely be used not only for ADA cases but also for other
discrimination laws administered by the
EEOC. As a result, all
parties should have a clearer understanding of what factors will be
considered in determining employee status for coverage under the
discrimination laws.
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