Saxon v. Thompson Orthodontics

• Decision Date: 19 August 1999
• Docket Number: No. 98-2401-JWL.,98-2401-JWL.
• Citation: 71 F.Supp.2d 1085
• Parties: Laurie SAXON, Plaintiff, v. THOMPSON ORTHODONTICS, Defendant.
• Court: U.S. District Court — District of Kansas

71 F.Supp.2d 1085

Laurie SAXON, Plaintiff, v. THOMPSON ORTHODONTICS, Defendant.

No. 98-2401-JWL.

United States District Court, D. Kansas.

August 19, 1999.

Joseph Y. Decuyper, Jr., Kansas City, MO, for plaintiff.

James B. Jackson, Kansas City, MO, for defendant.

MEMORANDUM AND ORDER

LUNGSTRUM, District Judge.

Plaintiff filed suit against defendant alleging violations of Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., arising out of her employment with defendant. This matter is presently before the court on defendant's motion for summary judgment (doc. # 12). For the reasons set forth below, defendant's motion is granted and plaintiff's complaint is dismissed in its entirety.

I. Background

Plaintiff's complaint is based on Title VII's anti-discrimination provision, which makes it unlawful for an "employer" to "refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's race, color, religion, sex, or national origin." See 42 U.S.C. § 2000e-2(a)(1). Defendant is subject to Title VII, then, only if, at the time of the alleged discrimination, it met the statutory definition of "employer," to wit: "a person engaged in an industry affecting commerce who has fifteen or more employees for each working day in each of twenty or more calendar weeks in the current or preceding calendar year." See Walters v. Metropolitan Educational Enterprises, Inc., 519 U.S. 202, 205, 117 S.Ct. 660, 136 L.Ed.2d 644 (1997) (quoting 42 U.S.C. § 2000e(b)).¹ In its motion, defendant argues that summary judgment is appropriate on plaintiff's complaint because it is not an "employer" within the meaning of § 2000e(b) (i.e., defendant did not have fifteen or more employees during the relevant period).

II. Discussion

A review of the limited record before the court reveals the following uncontroverted facts. Defendant Thompson Orthodontics is organized as a professional corporation under the laws of Kansas. During the relevant time period, Drs. Donald, Jeffrey and Doug Thompson were the shareholders and directors of the professional corporation. The doctors received compensation based on the firm's profits, they shared responsibility for firm debts, they participated in all management decisions and set firm policy. The doctors, however, are identified as "employees" on an internal firm document. This document lists all "employees" of the corporation and sets forth year-to-date earnings and withholding information. The document indicates that the firm withheld FICA taxes for each of the doctor/shareholders. During this same period, Miriam Thompson and Grace Thompson, the wives of Drs. Donald and Jeffrey Thompson, respectively, served as decorating consultants with respect to the firm's office. Mmes. Thompson received quarterly remuneration for their services and the firm withheld FICA taxes from this remuneration. They, too, are identified on the internal document as "employees."

The parties agree that defendant does not meet the fifteen-employee minimum for purposes of Title VII coverage unless the doctor/shareholders and Mmes. Thompson are counted as employees of the firm. If the doctor/shareholders and Mmes. Thompson are not employees, then defendant does not have the requisite number of employees to constitute an "employer" within the meaning of Title VII and plaintiff's complaint must be dismissed.

A. Status of Mmes. Thompson

Courts have applied a variety of tests to determine whether a plaintiff has demonstrated an employee-employer relationship for purposes of federal anti-discrimination statutes — the common law agency inquiry; the "hybrid" common law-economic realities method; and the single employer or true economic realities test. Lockard v. Pizza Hut, Inc., 162 F.3d 1062, 1069 (10th Cir.1998). The Tenth Circuit has endorsed the use of the hybrid approach for purposes of determining whether a plaintiff is an employee of a particular entity for Title VII purposes. See Lambertsen v. Utah Dep't of Corrections, 79 F.3d 1024, 1028 (10th Cir.1996). Although this approach considers the economic realities of the working relationship, "the focus of the inquiry is the employer's right to control the `means and manner' of the worker's performance." Oestman v. National Farmers Union Ins. Co., 958 F.2d 303, 305 (10th Cir.1992) (applying hybrid test to determine whether insurance agent was an "employee" for purposes of ADEA) (quoting Spirides v. Reinhardt, 613 F.2d 826, 831 (D.C.Cir.1979)). Other factors to consider when applying the hybrid test include the following:

(1) the kind of occupation, with reference to whether the work usually is done under the direction of a supervisor or is done by a specialist without supervision; (2) the skill required in the particular occupation; (3) whether the "employer" or the individual in question furnishes the equipment used and the place of work; (4) the length of time during which the individual has worked; (5) the method of payment, whether by time or by the job; (6) the manner in which the work relationship is terminated; i.e., by one or both parties, with or without notice and explanation; (7) whether annual leave is afforded; (8) whether the work is an integral part of the business of the "employer"; (9) whether the worker accumulates retirement benefits; (10) whether the "employer" pays social security taxes; and (11) the intention of the parties.

Id. (quoting Spirides, 613 F.2d at 832); accord Lambertsen, 79 F.3d at 1028. No single factor is conclusive. Lambertsen, 79 F.3d at 1028 (citing Oestman, 958 F.2d at 305). Rather, the court must consider the totality of the circumstances surrounding the working relationship between the parties. Id. (citing Oestman, 958 F.2d at 305).

As noted above, the record before the court is very limited. The facts demonstrate that Mmes. Thompson essentially helped decorate the office on various occasions. While there is no evidence that the firm controlled the means or manner of the performance of Mmes. Thompson — a fact that suggests an employer-independent contractor relationship — there is some evidence that tends to suggest an employer-employee relationship. Specifically, Mmes. Thompson were compensated on a quarterly basis, had FICA taxes withheld from their compensation, and were referred to as "employees" on certain internal documents. These facts suggest that the parties intended Mmes. Thompson to be employees. While these facts certainly are not conclusive of the issue, the court concludes that these facts are sufficient to survive summary judgment, particularly in light of the dearth of evidence suggesting otherwise.

B. Status of the Doctor/Shareholders

The court now turns to address whether the doctor/shareholders are employees of the corporation. The Tenth Circuit has not had the opportunity to address whether shareholders of a professional corporation should be counted as employees of that corporation for purposes of Title VII. Moreover, the court has not uncovered any district court opinions predicting how the Tenth Circuit might resolve this issue. Although several other circuits have specifically addressed this issue, there is a split of authority among those circuits. The two leading cases, EEOC v. Dowd & Dowd, Ltd., 736 F.2d 1177 (7th Cir.1984) and Hyland v. New Haven Radiology Assocs., 794 F.2d 793 (2d Cir.1986), highlight the two approaches courts have taken in resolving the question of whether shareholders of professional corporations are employees for purposes of federal anti-discrimination statutes. In Dowd & Dowd, the Seventh Circuit concluded that the "economic reality" of a professional corporation was analogous to a partnership in terms of management, control and ownership. 736 F.2d at 1178. Thus, according to the Seventh Circuit, just as partners could not be counted toward the requisite number of employees for Title VII liability, so too shareholders of a professional corporation could not be counted. Id.; accord Fountain v. Metcalf, Zima & Co., 925 F.2d 1398 (11th Cir.1991) (same). In Hyland, on the other hand, the Second Circuit rejected the "economic reality" test of Dowd & Dowd and held that the corporate form dictated that shareholders of a professional corporation are employees of the corporation, precluding any examination of whether the entity is in fact a partnership. 794 F.2d at 797-98. Not surprisingly, defendant urges the court to adopt the approach of the Seventh Circuit in Dowd & Dowd, while plaintiff urges the court to follow the Second Circuit's approach in Hyland.

Unfortunately, the language of Title VII itself is not particularly instructive on this issue. As the Tenth Circuit has noted, the statutory definition of "employee" is circular in its description. See Wheeler v. Main Hurdman, 825 F.2d 257, 263 (10th Cir.1987). Title VII defines an "employee" as "an individual employed by an employer." 42 U.S.C. § 2000e(f). It defines an "employer" as "a person engaged in an industry affecting commerce who has fifteen or more employees." Id. § 2000e(b).

In essence, then, the court is left to resolve an issue of first impression in the Tenth Circuit on which the circuits have split and the statute itself is, for all practical purposes, silent. In light of these circumstances, the court acknowledges that a reasonable resolution of the issue could follow either of the approaches set forth above. Nonetheless, the court must endeavor to ascertain which approach (or perhaps some variation thereof) it believes the Tenth Circuit would adopt if faced with the issue before the court here.

The most recent decision addressing whether shareholders of a professional corporation are employees for purposes of the federal anti-discrimination statutes is the Eighth Circuit's opinion in Devine v. Stone, Leyton & Gershman, P.C., 100 F.3d 78 (8th Cir.1996). In D...