All professional corporations should become familiar with the recent United States Supreme Court decision in Clackamas Gastroenterology Associates, P.C. v Wells. The case involved a complaint filed under the Americans with Disabilities Act (“ADA”) and decided the issue of who in a professional corporation is considered an employee for the purposes of the ADA. The definition of employee is important because it is used to determine whether an employer is subject to the ADA, which exempts employers with fewer than15 employees employed during at least 20 weeks over a one-year period.
The suit was filed by Deborah Ann Wells (“Wells”) who was employed by Clackamas Gastroenterology Associates, P. C. (“Clackamas”) as a bookkeeper. Clackamas operated a medical clinic with four physician-shareholders. When Clackamas terminated Wells, she filed suit, alleging she was terminated in violation of the ADA. Clackamas moved to have Wells’ case dismissed, arguing that the clinic employed fewer then 15 employees and, therefore, was exempt from the requirements of the ADA. Wells responded by arguing Clackamas met the 15-employee threshold for coverage by the ADA because the four physician-shareholders were employees of the professional corporation.
In reversing the lower court’s ruling in favor of Wells, the U.S. Supreme Court stated it would follow the common-law definition of the master-servant relationship, which focuses on the employer/master’s control over the employee/servant. Thus, the Supreme Court focused on six factors used by the Equal Employment Opportunity Commission to determine employee status:
• Whether the corporation can hire or fire the individual or set rules and regulations to control the individual’s work.
• Whether and to what extent the corporation supervises the individual’s work.
• Whether the individual reports to a supervisor.
• Whether and to what extent the individual is able to influence the corporation.
• Whether the parties intended the individual to be an employee.
• Whether the individual shared in profits, losses and liabilities of the corporation.
In applying the above factors to the four physician-shareholders, the Supreme Court ruled the physicians should not be considered employees. Accordingly, Clackamas was exempt from ADA requirements.
The Supreme Court’s ruling is favorable to small professional employers, i.e., attorneys, accountants, doctors and other professionals, because it is consistent with Congress’ intent that certain employment discrimination statutes should exempt small businesses from the requirement to comply with the statutes’ requirements. The decision also provides a guide for professional corporations in determining whether they must comply with the ADA. Moreover, the reasoning in the Supreme Court’s decision may also be followed when determining whether other employment discrimination statutes with minimum employee requirements apply to professional corporations. If you have a question regarding whether your professional corporation must comply with the ADA or other employment statutes, please telephone a member of the firm.