Hyland v. New Haven Radiology Associates, P.C.

• Decision Date: 27 June 1986
• Docket Number: No. 253,D,253
• Citation: 794 F.2d 793
• Parties: 41 Fair Empl.Prac.Cas. 183, 41 Empl. Prac. Dec. P 36,460, 55 USLW 2043 John HYLAND, M.D., Plaintiff-Appellant, v. NEW HAVEN RADIOLOGY ASSOCIATES, P.C. and Gerald Fishbone, M.D., Shelby Galloway, M.D., Arthur Knowlton, M.D., Edward Prokop, M.D., Solomon Schwartz, M.D., and Robert Shapiro, M.D., individually and in their corporate capacities, Defendants-Appellees. ocket 85-7396.
• Court: U.S. Court of Appeals — Second Circuit

Page 793

794 F.2d 793

41 Fair Empl.Prac.Cas. 183,

41 Empl. Prac. Dec. P 36,460, 55 USLW 2043

John HYLAND, M.D., Plaintiff-Appellant, v. NEW HAVEN RADIOLOGY ASSOCIATES, P.C. and Gerald Fishbone M.D., Shelby Galloway, M.D., Arthur Knowlton, M.D., Edward Prokop, M.D., Solomon Schwartz, M.D., and Robert Shapiro M.D., individually and in their corporate capacities Defendants-Appellees.

No. 253, Docket 85-7396.

United States Court of Appeals, Second Circuit.

Argued Oct. 2, 1985.

Decided June 27, 1986.

Joseph D. Garrison, New Haven, Conn. (Garrison, Kahn, Crane & Silbert, New Haven, Conn., Lucinda M. Finley, Yale Law School, New Haven, Conn., of counsel), for plaintiff-appellant.

David R. Schaefer, New Haven, Conn. (Robert J. Lofgren, Brenner, Saltzman, Wallman & Goldman, New Haven, Conn., James A. Wade, Robinson & Cole, Hartford, Conn., of counsel), for defendants-appellees.

Before CARDAMONE, PRATT and MINER, Circuit Judges.

MINER, Circuit Judge:

Plaintiff-appellant, John Hyland, M.D., claiming a violation of the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. Sec. 623(a)(1), alleges that he was forced to resign as an employee, officer and director of defendant-appellee, New Haven Radiology Associates, P.C. ("NHRA") because he was fifty-one years of age. Following extensive discovery, NHRA, a professional corporation, moved for summary judgment, asserting that Hyland lacked the necessary standing to invoke the protections afforded by the ADEA. Applying an "economic realities" test, the District Court for the District of Connecticut (Dorsey, J.) granted the motion, finding that NHRA "amounts to a partnership in all but name," Hyland v. New Haven Radiology Associates, 606 F.Supp. 617, 621 (D.Conn. 1985), and that Hyland was, in effect, a partner in the enterprise. According to the district court, Hyland therefore was not an employee entitled to claim the benefits provided by the ADEA. Because we find that there is no basis for a finding that NHRA is a partnership, and that Hyland was in fact a corporate employee, we reverse and remand. ¹

I.

Appellant and four other radiologists organized NHRA in 1972 as a professional services corporation under the laws of the State of Connecticut to conduct the practice of radiology. Pursuant to the terms of a stockholders' agreement, ² each of the five founding members contributed the same amount of capital for equal shares in the corporation and an equal voice in management. Profits and losses were divided evenly among the members, all of whom served as corporate officers and directors. The stockholders agreed that stock could be held only by shareholder-members, who were required to be licensed physicians. Upon the death, withdrawal or termination of any member, the member or his estate was required to sell, and NHRA to purchase, that shareholder's stock at a price fixed in accordance with the valuation provisions of the agreement. No stock could be held in the corporation by a non-member or non-employee. The stockholders' agreement provided for the admission to membership of additional "Stockholder-Employees," who would enjoy the benefits of the corporation and participate in the management Each shareholder also signed a separate two-year renewable employment agreement with the corporation, and the terms of these agreements were substantially identical. All members were compensated at the rate of $60,000 annually, subject to withholding of applicable taxes. A further provision in each doctor's employment agreement allowed for the payment of bonuses to members in the sole discretion of the Board of Directors. Each physician was required to be "a full time employee of the company during the term of this agreement," with a duty to devote his best efforts in rendering services to NHRA's patients. He also was required to comply with all company policies and regulations, to turn over to the corporation all compensation earned from rendering professional services of any kind, and to maintain membership in medical societies as required by the Board of Directors. The agreement also entitled each member to a four-week paid vacation; disability payments from the corporation; leave to attend, and reimbursement for the cost of, educational programs; and certain payments upon termination of employment.

of its affairs equally with the other shareholders. ³

The corporation performed all radiological services for St. Raphael Hospital. Each member agreed that he would not work in any radiological capacity for St. Raphael Hospital during the two-year period following termination of his corporate employment. No individual shareholder-member could be terminated without cause from NHRA unless by the vote of three-fourths of all stockholder-members. Hyland's employment agreement differed from those signed by the other co-founders in that he was required to give six-months' written notice of his intention to leave the corporation's employ. The agreement entered into between NHRA and Robert Shapiro, the corporation's president, also was somewhat different from the others in that it called for a payment of $500 a month to a deferred compensation account to replace a benefit Dr. Shapiro lost from another source when he joined NHRA.

On July 22, 1980, upon the unanimous consent of all the other members, Hyland, then fifty-one years of age, was asked to resign his position as a member and employee of NHRA. According to NHRA, the request was prompted by complaints of appellant's unavailability, lack of cooperation and abusive conduct. Thereafter, appellant entered into an agreement with the corporation relating to the conditions of his termination as an employee, shareholder, director and officer in the corporation. This agreement dealt with the repurchase of Hyland's stock, severance pay and the lump-sum withdrawal of a profit-sharing account balance, among other things.

As a result of his termination, appellant brought this action, claiming NHRA discriminated against him in violation of section 623(a)(1) of the ADEA. Hyland argued that the corporation may be classified as an employer under the Act, and that he and its staff were employees protected by the ADEA. The corporation moved for summary judgment on the grounds that it was not an employer and that Hyland was not an employee as defined by the ADEA. It contended that because NHRA is more like a partnership than a corporation, Hyland should be considered a partner and not an employee. The district court granted the motion. In doing so, the court decided that NHRA chose to do business in the corporate form merely "to gain advantageous tax and civil liability treatment," 606 F.Supp. at 621, and that although the corporation could be classified as an employer, Hyland could not be classified as an employee. Judge Dorsey found that NHRA was actually managed and operated like a partnership and held that Hyland, as a member of this common enterprise, could not separate himself from his management and ownership role so as to be considered an "employee."

II.

Appellant advances his claim under section 623(a)(1) of the ADEA, which provides:

It shall be unlawful for an employer--to fail or refuse to hire or to discharge any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's age.... ⁴

The statute is considered remedial in nature and must be given a liberal interpretation in order to effectuate its purposes, Zimmerman v. North American Signal Co., 704 F.2d 347, 353 (7th Cir.1983); E.E.O.C. v. First Catholic Slovak Ladies Association, 694 F.2d 1068, 1070 (6th Cir.1982), cert. denied, 464 U.S. 819, 104 S.Ct. 80, 78 L.Ed.2d 90 (1983). Its language demonstrates a single congressional aim--to prohibit "age discrimination by employers against employees and applicants for employment." Levine v. Fairleigh Dickinson University, 646 F.2d 825, 828 (3d Cir.1981). A plain reading of the Act indicates that its protection extends only to those individuals who are in a direct employment relationship with an employer, and that a claim under its provisions lies solely in favor of a person who is an employee at the time of termination. See Garrett v. Phillips Mills, Inc., 721 F.2d 979, 980-81 (4th Cir.1983).

The Act defines employer in general terms as "a person engaged in an industry affecting commerce who has twenty or more employees...." 29 U.S.C. Sec. 630(b). "Person" is defined as "one or more individuals, partnerships, associations, labor organizations, corporations, business trusts, legal representatives, or any organized groups of persons." 29 U.S.C. Sec. 630(a). The ADEA definition of employee, "an individual employed by any employer," 29 U.S.C. Sec. 630(f), excludes only elected officials and their personal staff members, id.

The Fair Labor Standards Act of 1938, 29 U.S.C. Sec. 203(a), (d), (e)(1) (1982) ("FLSA"), Title VII of the Civil Rights Act of 1964, 42 U.S.C. Sec. 2000e(a), (b), (f) (1982) ("Title VII"), and the ADEA carry nearly identical provisions defining "employer" and "employee." Since all three statutes have a similar purpose--to stamp-out discrimination in various forms--cases construing the definitional provisions of one are persuasive authority when interpreting the others. See Lorillard v. Pons, 434 U.S. 575, 584, 98 S.Ct. 866, 872, 55 L.Ed.2d 40 (1978); Geller v. Markham, 635 F.2d 1027, 1032 (2d Cir.1980), cert. denied, 451 U.S. 945, 101 S.Ct. 2028, 68 L.Ed.2d 332 (1981). In various situations calling for the application of these statutes, an individual's status as a major stockholder, officer or director of a corporation has been found to be compatible with his or her status as an employee. See, e.g., Zimmerman, 704 F.2d at 350-54 (ADEA plaintiff, a corporate vice president and one-third shareholder, considered as employee); First Catholic Slovak Ladies Association, 694 F.2d at 1070 (officer-directors...