Clackamas Gastroenterology Associates, P.C. v. Wells

• Decision Date: 22 April 2003
• Docket Number: No. 01-1435.,01-1435.
• Citation: 538 U.S. 440
• Parties: CLACKAMAS GASTROENTEROLOGY ASSOCIATES, P. C. v. WELLS.
• Court: U.S. Supreme Court

538 U.S. 440

CLACKAMAS GASTROENTEROLOGY ASSOCIATES, P. C. v. WELLS.

No. 01-1435.

Supreme Court of United States.

Argued February 25, 2003.

Decided April 22, 2003.

Respondent filed suit alleging that petitioner medical clinic violated the Americans with Disabilities Act of 1990 (ADA or Act) when it terminated her employment. Petitioner moved for summary judgment, asserting that it was not covered by the Act because it did not have 15 or more employees for the 20 weeks required by the ADA. That assertion's accuracy depends on whether the four physician-shareholders who own the professional corporation and constitute its board of directors are counted as employees. In granting the motion, the District Court concluded that the physicians were more analogous to partners in a partnership than to shareholders in a corporation and therefore were not employees under the ADA. The Ninth Circuit reversed, finding no reason to permit a professional corporation to reap the tax and civil liability advantages of its corporate status and then argue that it is like a partnership so as to avoid employment discrimination liability.

Held:

1. The common-law element of control is the principal guidepost to be followed in deciding whether the four director-shareholder physicians in this case should be counted as "employees." Where, as here, a statute does not helpfully define the term "employee," this Court's cases construing similar language give guidance in how best to fill the statutory text's gap. Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 322, 323. The professional corporation is a new type of business entity with no exact common-law precedent, but the common law's definition of the master-servant relationship provides helpful guidance: the focus on the master's control over the servant. Accordingly, the Equal Employment Opportunity Commission (EEOC) argues that a court should examine whether shareholder-directors operate independently and manage the business or instead are subject to the firm's control. Specific EEOC guidelines discuss the broad question of who is an "employee" and the narrower one of when partners, officers, board of directors' members, and major shareholders qualify as employees. The Court is persuaded by the EEOC's focus on the common-law touchstone of control and specifically by its submission that each of six factors are relevant to the inquiry whether a shareholder-director is an employee. Pp. 444-451.

2. Because the District Court's findings appear to weigh in favor of concluding that the four physicians are not clinic employees, but evidence in the record may contradict those findings or support a contrary conclusion under the EEOC's standard, the case is remanded for further proceedings. P. 451.

271 F. 3d 903, reversed and remanded.

STEVENS, J., delivered the opinion of the Court, in which REHNQUIST, C. J., and O'CONNOR, SCALIA, KENNEDY, SOUTER, and THOMAS, JJ., joined. GINSBURG, J., filed a dissenting opinion, in which BREYER, J., joined, post, p. 451.

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT.

Steven W. Seymour argued the cause for petitioner. With him on the briefs was Andria C. Kelly.

Irving L. Gornstein argued the cause for the United States et al. as amici curiae urging reversal. With him on the brief were Solicitor General Olson, Deputy Solicitor General Clement, Philip B. Sklover, Lorraine C. Davis, and Robert J. Gregory.

Craig A. Crispin argued the cause and filed a brief for respondent.^*

JUSTICE STEVENS delivered the opinion of the Court.

The Americans with Disabilities Act of 1990 (ADA or Act), 104 Stat. 327, as amended, 42 U. S. C. § 12101 et seq., like other federal antidiscrimination legislation,¹ is inapplicable to very small businesses. Under the ADA an "employer" is not covered unless its work force includes "15 or more employees for each working day in each of 20 or more calendar weeks in the current or preceding calendar year." § 12111(5). The question in this case is whether four physicians actively engaged in medical practice as shareholders and directors of a professional corporation should be counted as "employees."

I

Petitioner, Clackamas Gastroenterology Associates, P. C., is a medical clinic in Oregon. It employed respondent, Deborah Anne Wells, as a bookkeeper from 1986 until 1997. After her termination, she brought this action against the clinic alleging unlawful discrimination on the basis of disability under Title I of the ADA. Petitioner denied that it was covered by the Act and moved for summary judgment, asserting that it did not have 15 or more employees for the 20 weeks required by the statute. It is undisputed that the accuracy of that assertion depends on whether the four physician-shareholders who own the professional corporation and constitute its board of directors are counted as employees.

The District Court, adopting the Magistrate Judge's findings and recommendation, granted the motion. Relying on an "economic realities" test adopted by the Seventh Circuit in EEOC v. Dowd & Dowd, Ltd., 736 F. 2d 1177, 1178 (1984), the District Court concluded that the four doctors were "more analogous to partners in a partnership than to shareholders in a general corporation" and therefore were "not employees for purposes of the federal antidiscrimination laws." App. 89.

A divided panel of the Court of Appeals for the Ninth Circuit reversed. Noting that the Second Circuit had rejected the economic realities approach, the majority held that the use of any corporation, including a professional corporation, "`precludes any examination designed to determine whether the entity is in fact a partnership.'" 271 F. 3d 903, 905 (2001) (quoting Hyland v. New Haven Radiology Associates, P. C., 794 F. 2d 793, 798 (CA2 1986)). It saw "no reason to permit a professional corporation to secure the `best of both possible worlds' by allowing it both to assert its corporate status in order to reap the tax and civil liability advantages and to argue that it is like a partnership in order to avoid liability for unlawful employment discrimination." 271 F. 3d, at 905. The dissenting judge stressed the differences between an Oregon physicians' professional corporation and an ordinary business corporation,² and argued that Congress' reasons for exempting small employers from the coverage of the Act should apply to petitioner. Id., at 906-909 (opinion of Graber, J.).

We granted certiorari to resolve the conflict in the Circuits, which extends beyond the Seventh and the Second Circuits.³ 536 U. S. 990 (2002).

II

"We have often been asked to construe the meaning of `employee' where the statute containing the term does not helpfully define it." Nationwide Mut. Ins. Co. v. Darden, 503 U. S. 318, 322 (1992). The definition of the term in the ADA simply states that an "employee" is "an individual employed by an employer." 42 U. S. C. § 12111(4). That surely qualifies as a mere "nominal definition" that is "completely circular and explains nothing." Darden, 503 U. S., at 323. As we explained in Darden, our cases construing similar language give us guidance on how best to fill the gap in the statutory text.

In Darden we were faced with the question whether an insurance salesman was an independent contractor or an "employee" covered by the Employee Retirement Income Security Act of 1974 (ERISA). Because ERISA's definition of "employee" was "completely circular," 503 U. S., at 323, we followed the same general approach that we had previously used in deciding whether a sculptor was an "employee" within the meaning of the Copyright Act of 1976, see Community for Creative Non-Violence v. Reid, 490 U. S. 730 (1989),⁴ and we adopted a common-law test for determining who qualifies as an "employee" under ERISA.⁵ Quoting Reid, 490 U. S., at 739-740, we explained that "`when Congress has used the term "employee" without defining it, we have concluded that Congress intended to describe the conventional master-servant relationship as understood by common-law agency doctrine.'" Darden, 503 U. S., at 322-323.

Rather than looking to the common law, petitioner argues that courts should determine whether a shareholder-director of a professional corporation is an "employee" by asking whether the shareholder-director is, in reality, a "partner." Brief for Petitioner 9, 15-16, 21 (arguing that the four shareholders in the clinic are more analogous to partners in a partnership than shareholders in a corporation and that "those who are properly classified as partners are not `employees' for purposes of the anti-discrimination statutes"). The question whether a shareholder-director is an employee, however, cannot be answered by asking whether the shareholder-director appears to be the functional equivalent of a partner. Today there are partnerships that include hundreds of members, some of whom may well qualify as "employees" because control is concentrated in a small number of managing partners. Cf. Hishon v. King & Spalding, 467 U. S. 69, 79, n. 2 (1984) (Powell, J., concurring) ("[A]n employer may not evade the strictures of Title VII simply by labeling its employees as `partners'"); EEOC v. Sidley Austin Brown & Wood, 315 F. 3d 696, 709 (CA7 2002) (Easterbrook, J., concurring in part and concurring in judgment); Strother v. Southern California Permanente Medical Group, 79 F. 3d 859 (CA9 1996). Thus, asking whether shareholder-directors are partners — rather than asking whether they are employees — simply begs the question.

Nor does the approach adopted by the Court of Appeals in this case fare any better. The majority's approach, which paid particular attention to "the broad purpose of the ADA," 271 F. 3d, at 905, is consistent with the statutory purpose of ridding the Nation of the evil of discrimination. See 42 U. S. C. § 12101(b).⁶ Nevertheless, two countervailing considerations must be weighed in the balance. First, as the dissenting judge noted below, the...