CLACKAMAS GASTROENTEROLOGY ASSOCIATES, P.C. v. WELLS, 538 U.S. 440 (2003) 123 S.Ct. 1673
CLACKAMAS GASTROENTEROLOGY ASSOCIATES, P.C. v. WELLS.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT.
No. 01-1435.
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.
Page 441
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.
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.[fn*]
[fn*] Briefs of amici curiae urging affirmance were filed for
the American Federation of Labor and Congress of Industrial
Organizations by Jonathan P. Hiatt, James B. Coppess, and
Laurence Gold; for the Lawyers' Committee for Civil Rights
Under Law et al. by Barbara R. Arnwine, Thomas J. Henderson,
Michael L. Foreman, Daniel B. Kohrman, Melvin Radowitz, Vincent
A. Eng, Dennis C. Hayes, and Judith L. Lichtman; and for the
National Employment Lawyers Association et al. by Merl H.
Wayman and Jenifer Bosco.
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,[fn1] is inapplicable
to very small businesses. Under the ADA an "employer"
Page 442
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
Page 443
(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,[fn2] and argued that Congress'
Page 444
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.[fn3] 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
Page 445
(1989),[fn4] and we adopted a common-law test for determining
who qualifies as an "employee" under ERISA.[fn5] 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
Page 446
"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).[fn6] Nevertheless, two countervailing
considerations must be weighed in the balance. First, as the
Page 447
dissenting judge noted below, the congressional decision to limit
the coverage of the legislation to firms with 15 or more
employees has its own justification that must be respected â€â€
namely, easing entry into the market and preserving the
competitive position of smaller firms. See 271 F. 3d, at 908
(opinion of Graber, J.) ("Congress decided `to spare very small
firms from the potentially crushing expense of mastering the
intricacies of the antidiscrimination laws, establishing
procedures to assure compliance, and defending against suits when
efforts at compliance fail'" (quoting Papa v. Katy Industries,
Inc., 166 F. 3d 937, 940 (CA7), cert. denied, 528 U.S. 1019
(1999))). Second, as Darden reminds us, congressional silence
often reflects an expectation that courts will look to the common
law to fill gaps in statutory text, particularly when an
undefined term has a settled meaning at common law. Congress has
overridden judicial decisions that went beyond the common law in
an effort to correct "`the mischief'" at which a statute was
aimed. See 503 U.S., at 324-325.
Perhaps the Court of Appeals' and the parties' failure to look
to the common law for guidance in this case stems from the fact
that we are dealing with a new type of business entity that has
no exact precedent in the common law. State statutes now permit
incorporation for the purpose of practicing a profession, but in
the past "the so-called learned professions were not permitted to
organize as corporate entities." 1A W. Fletcher, Cyclopedia of
the Law of Private Corporations § 112.10 (rev. ed. 1997-2002).
Thus, professional corporations are relatively young participants
in the market, and their features vary from State to State. See
generally 1 B. Bittker & J. Eustice, Federal Income Taxation of
Corporations and Shareholders ¶ 2.06 (7th ed. 2002) (explaining
that States began to authorize the creation of professional
corporations in the late 1950's and that the momentum to form
professional corporations grew in the 1970's).
Page 448
Nonetheless, the common law's definition of the master-servant
relationship does provide helpful guidance. At common law the
relevant factors defining the master-servant relationship focus
on the master's control over the servant. The general definition
of the term "servant" in the Restatement (Second) of Agency §
2(2) (1957), for example, refers to a person whose work is
"controlled or is subject to the right to control by the master."
See also id., § 220(1) ("A servant is a person employed to
perform services in the affairs of another and who with respect
to the physical conduct in the performance of the services is
subject to the other's control or right to control"). In
addition, the Restatement's more specific definition of the term
"servant" lists factors to be considered when distinguishing
between servants and independent contractors, the first of which
is "the extent of control" that one may exercise over the details
of the work of the other. Id., § 220(2)(a). We think that the
common-law element of control is the principal guidepost that
should be followed in this case.
This is the position that is advocated by the Equal Employment
Opportunity Commission (EEOC), the agency that has special
enforcement responsibilities under the ADA and other federal
statutes containing similar threshold issues for determining
coverage. It argues that a court should examine "whether
shareholder-directors operate independently and manage the
business or instead are subject to the firm's control." Brief for
United States et al. as Amici Curiae 8. According to the EEOC's
view, "[i]f the shareholder-directors operate independently and
manage the business, they are proprietors and not employees; if
they are subject to the firm's control, they are employees."
Ibid.
Specific EEOC guidelines discuss both the broad question of who
is an "employee" and the narrower question of when partners,
officers, members of boards of directors, and major shareholders
qualify as employees. See 2 Equal Employment Opportunity
Commission, Compliance Manual
Page 449
§§ 605:0008-605:00010 (2000) (hereinafter EEOC Compliance
Manual).[fn7] With respect to the broad question, the
guidelines list 16 factors  taken from Darden,
503 U.S., at 323-324  that may be relevant to "whether the employer controls
the means and manner of the worker's work performance." EEOC
Compliance Manual § 605:0008, and n. 71.[fn8] The guidelines
list six factors to be considered in answering the narrower
question, which they frame as "whether the individual acts
independently and participates in managing the organization, or
whether the individual is subject to the organization's control."
Id., § 605:0009.
We are persuaded by the EEOC's focus on the common-law
touchstone of control, see Skidmore v. Swift & Co.,
323 U.S. 134, 140 (1944),[fn9] and specifically by its submission that
each of the following six factors is relevant to the inquiry
whether a shareholder-director is an employee:
"Whether the organization can hire or fire the
individual or set the rules and regulations of the
individual's work
Page 450
"Whether and, if so, to what extent the organization
supervises the individual's work
"Whether the individual reports to someone higher in
the organization
"Whether and, if so, to what extent the individual is
able to influence the organization
"Whether the parties intended that the individual be
an employee, as expressed in written agreements or
contracts
"Whether the individual shares in the profits,
losses, and liabilities of the organization." EEOC
Compliance Manual § 605:0009.[fn10]
As the EEOC's standard reflects, an employer is the person, or
group of persons, who owns and manages the enterprise. The
employer can hire and fire employees, can assign tasks to
employees and supervise their performance, and can decide how the
profits and losses of the business are to be distributed. The
mere fact that a person has a particular title  such as partner,
director, or vice president  should not necessarily be used to
determine whether he or she is an employee or a proprietor. See
ibid. ("An individual's title . . . does not determine whether
the individual is a partner, officer, member of a board of
directors, or major shareholder, as opposed to an employee"). Nor
should the mere existence of a document styled "employment agreement"
lead inexorably to the conclusion that either party is an employee.
See ibid. (looking to whether "the parties intended that the
individual be an employee, as expressed in written
Page 451
agreements or contracts"). Rather, as was true in applying
common-law rules to the independent-contractor-versus-employee
issue confronted in Darden, the answer to whether a
shareholder-director is an employee depends on "`all of the
incidents of the relationship . . . with no one factor being
decisive.'" 503 U.S., at 324 (quoting NLRB v. United Ins. Co.
of America, 390 U.S. 254, 258 (1968)).
III
Some of the District Court's findings  when considered in
light of the EEOC's standard  appear to weigh in favor of a
conclusion that the four director-shareholder physicians in this
case are not employees of the clinic. For example, they
apparently control the operation of their clinic, they share the
profits, and they are personally liable for malpractice claims.
There may, however, be evidence in the record that would
contradict those findings or support a contrary conclusion under
the EEOC's standard that we endorse today.[fn11] Accordingly,
as we did in Darden, we reverse the judgment of the Court of
Appeals and remand the case to that court for further proceedings
consistent with this opinion.
It is so ordered.
[fn1] See, e.g., 29 U.S.C. § 630(b) (setting forth a
20-employee threshold for coverage under the Age Discrimination
in Employment Act of 1967 (ADEA)); 42 U.S.C. § 2000e(b)
(establishing a 15-employee threshold for coverage under Title
VII of the Civil Rights Act of 1964).
[fn2] The dissenting judge summarized Oregon's treatment of
professional corporations as follows:
"In Oregon, a physicians' professional corporation, like this
one, preserves the professional relationship between the
physicians and their patients, as well as the standards of
conduct that the medical profession requires. Or. Rev. Stat. §
58.185(2). Further, `a shareholder of the corporation is
personally liable as if the shareholder were rendering the
service or services as an individual' with respect to all claims
of negligence, wrongful acts or omissions, or misconduct
committed in the rendering of professional services. Or. Rev.
Stat. § 58.185(3) (emphasis added). A licensed professional also
is jointly and severally liable for such claims, albeit with
some dollar limitations. Or. Rev. Stat. § 58.185(4)-(9). Ordinary
business corporation rules apply only to other aspects of the
entity, apart from the provision of professional services. Or.
Rev. Stat. § 58.185(11). A professional corporation's activities
must remain consistent with the requirements of the type of
license in question, Or. Rev. Stat. § 58.205, and it may merge
only with other professional corporations, Or. Rev. Stat. §
58.196, so the provision of professional services  with its
attendant liabilities  must remain at the heart of a P.C. like
this defendant.
"Additional special rules apply to professional corporations
that are organized to practice medicine, none of which apply to
ordinary business corporations. A majority of the directors, the
holders of the majority of shares, and all officers except the
secretary and treasurer must be Oregon-licensed physicians. Or.
Rev. Stat. § 58.375(1)(a)-(c). The Board of Medical Examiners is
given express statutory authority to require more than a majority
of shares, and more than a majority of director positions, to be
held by Oregon-licensed physicians. Or. Rev. Stat. § 58.375(1)(d)
& (e). The Board of Medical Examiners also may restrict the
corporate powers of a professional corporation organized for the
purpose of practicing medicine, beyond the restrictions imposed
on ordinary business corporations. Or. Rev. Stat. § 58.379.
Lastly, Or. Rev. Stat. §§ 58.375 through 58.389 contain
impediments to the transfer of shares and other corporate
activities." 271 F. 3d, at 907-908 (opinion of Graber, J.)
(footnote omitted).
[fn3] The disagreement in the Circuits is not confined to the
particulars of the ADA. For example, the Seventh Circuit's
decision in EEOC v. Dowd & Dowd, Ltd., 736 F. 2d 1177 (1984),
concerned Title VII, and the Second Circuit's opinion in Hyland
v. New Haven Radiology Associates, P.C., 794 F. 2d 793 (1986),
involved the ADEA. See also Devine v. Stone, Leyton &
Gershman, P.C., 100 F. 3d 78 (CA8 1996) (Title VII case).
[fn4] In Reid, 490 U.S., at 738, the ownership of a copyright
in a statue depended on whether it had been "`prepared by an
employee within the scope of his or her employment'" within the
meaning of the Copyright Act of 1976.
[fn5] Darden described the common-law test for determining
whether a hired party is an employee as follows:
"`[W]e consider the hiring party's right to control the manner
and means by which the product is accomplished. Among the other
factors relevant to this inquiry are the skill required; the
source of the instrumentalities and tools; the location of the
work; the duration of the relationship between the parties;
whether the hiring party has the right to assign additional
projects to the hired party; the extent of the hired party's
discretion over when and how long to work; the method of payment;
the hired party's role in hiring and paying assistants; whether
the work is part of the regular business of the hiring party;
whether the hiring party is in business; the provision of
employee benefits; and the tax treatment of the hired party.'"
503 U.S., at 323-324 (quoting Community for Creative
Non-Violence v. Reid, 490 U.S. 730, 751-752 (1989), and citing
Restatement (Second) of Agency § 220(2) (1958)).
These particular factors are not directly applicable to this
case because we are not faced with drawing a line between
independent contractors and employees. Rather, our inquiry is
whether a shareholder-director is an employee or, alternatively,
the kind of person that the common law would consider an
employer.
[fn6] The meaning of the term "employee" comes into play when
determining whether an individual is an "employee" who may invoke
the ADA's protections against discrimination in "hiring,
advancement, or discharge," 42 U.S.C. § 12112(a), as well as when
determining whether an individual is an "employee" for purposes
of the 15-employee threshold. See § 12111(5)(A); see also Brief
for United States et al. as Amici Curiae 10-11; Schmidt v.
Ottawa Medical Center, P.C., 322 F. 3d 461 (CA7 2003).
Consequently, a broad reading of the term "employee" would â€â€
consistent with the statutory purpose of ridding the Nation of
discrimination  tend to expand the coverage of the ADA by
enlarging the number of employees entitled to protection and by
reducing the number of firms entitled to exemption.
[fn7] The EEOC's manual states that it applies across the board
to other federal antidiscrimination statutes. See EEOC Compliance
Manual § 605:0001 ("This Section discusses coverage, timeliness,
and other threshold issues to be considered when a charge is
first filed under Title VII of the Civil Rights Act of 1964, the
Age Discrimination in Employment Act of 1967 (ADEA), the
Americans with Disabilities Act of 1990 (ADA), or the Equal Pay
Act of 1963 (EPA)" (footnote omitted)).
[fn8] For example, the EEOC considers whether the work requires a
high level of skill or expertise, whether the employer furnishes
the tools, materials, and equipment, and whether the employer has
the right to control when, where, and how the worker performs the
job. Id., § 605:0008.
[fn9] As the Government has acknowledged, see Tr. of Oral Arg.
19, the EEOC's Compliance Manual is not controlling  even though
it may constitute a "body of experience and informed judgment" to
which we may resort for guidance. Skidmore v. Swift & Co.,
323 U.S., at 140; see also Christensen v. Harris County,
529 U.S. 576, 587 (2000) (holding that agency interpretations
contained in "policy statements, agency manuals, and enforcement
guidelines, all of which lack the force of law[,] do not warrant
Chevron-style deference").
[fn10] The EEOC asserts that these six factors need not
necessarily be treated as "exhaustive." Brief for United States
et al. as Amici Curiae 9. We agree. The answer to whether a
shareholder-director is an employee or an employer cannot be
decided in every case by a "`shorthand formula or magic phrase.'"
Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 324 (1992)
(quoting NLRB v. United Ins. Co. of America, 390 U.S. 254,
258 (1968)).
[fn11] For example, the record indicates that the four
director-shareholders receive salaries, Tr. of Oral Arg. 8, that
they must comply with the standards established by the clinic,
App. 66, and that they report to a personnel manager, ibid.
JUSTICE GINSBURG, with whom JUSTICE BREYER joins, dissenting.
"There is nothing inherently inconsistent between the
coexistence of a proprietary and an employment relationship."
Goldberg v. Whitaker House Cooperative, Inc., 366 U.S. 28, 32
(1961). As doctors performing the everyday work of petitioner
Clackamas Gastroenterology Associates, P.C., the
physician-shareholders function in several respects as
Page 452
common-law employees, a designation they embrace for various
purposes under federal and state law. Classifying as employees
all doctors daily engaged as caregivers on Clackamas' premises,
moreover, serves the animating purpose of the Americans with
Disabilities Act of 1990 (ADA or Act). Seeing no cause to shelter
Clackamas from the governance of the ADA, I would affirm the
judgment of the Court of Appeals.
An "employee," the ADA provides, is "an individual employed by
an employer." 42 U.S.C. § 12111(4). Where, as here, a federal
statute uses the word "employee" without explaining the term's
intended scope, we ordinarily presume "Congress intended to
describe the conventional master-servant relationship as
understood by common-law agency doctrine." Nationwide Mut. Ins.
Co. v. Darden, 503 U.S. 318, 322-323 (1992) (internal
quotation marks omitted). The Court today selects one of the
common-law indicia of a master-servant relationship  control
over the work of others engaged in the business of the enterprise
 and accords that factor overriding significance. Ante, at
448. I would not so shrink the inquiry.
Are the physician-shareholders "servants" of Clackamas for the
purpose relevant here? The Restatement defines "servant" to mean
"an agent employed by a master to perform service in his affairs
whose physical conduct in the performance of the service is
controlled or is subject to the right to control by the master."
Restatement (Second) of Agency § 2(2) (1957) (hereinafter
Restatement). When acting as clinic doctors, the
physician-shareholders appear to fit the Restatement definition.
The doctors provide services on behalf of the corporation, in
whose name the practice is conducted. See Ore. Rev. Stat. Ann. §
58.185(1)(a) (1998 Supp.) (shareholders of a professional
corporation "render the specified professional services of the
corporation" (emphasis added)). The doctors have employment
contracts with Clackamas, App. 71, under which they receive
salaries and
Page 453
yearly bonuses, Tr. of Oral Arg. 8, and they work at facilities
owned or leased by the corporation, App. 29, 71. In performing
their duties, the doctors must "compl[y] with . . . standards
[the organization has] established." Id., at 66; see
Restatement, ch. 7, tit. B, Introductory Note, p. 479 ("[F]ully
employed but highly placed employees of a corporation . . . are
not less servants because they are not controlled in their
day-to-day work by other human beings. Their physical activities
are controlled by their sense of obligation to devote their time
and energies to the interests of the enterprise.").
The physician-shareholders, it bears emphasis, invite the
designation "employee" for various purposes under federal and
state law. The Employee Retirement Income Security Act of 1974
(ERISA), much like the ADA, defines "employee" as "any individual
employed by an employer." 29 U.S.C. § 1002(6). Clackamas readily
acknowledges that the physician-shareholders are "employees" for
ERISA purposes. Tr. of Oral Arg. 6-7. Indeed, gaining
qualification as "employees" under ERISA was the prime reason the
physician-shareholders chose the corporate form instead of a
partnership. See id., at 7. Further, Clackamas agrees, the
physician-shareholders are covered by Oregon's workers'
compensation law, ibid., a statute applicable to "person[s] . . .
who . . . furnish services for a remuneration, subject to the
direction and control of an employer," Ore. Rev. Stat. Ann. §
656.005(30) (1996 Supp.). Finally, by electing to organize their
practice as a corporation, the physician-shareholders created an
entity separate and distinct from themselves, one that would
afford them limited liability for the debts of the enterprise. §§
58.185(4), (5), (10), (11) (1998 Supp.). I see no reason to allow
the doctors to escape from their choice of corporate form when
the question becomes whether they are employees for purposes of
federal antidiscrimination statutes.
Nothing in or about the ADA counsels otherwise. As the Court
observes, the reason for exempting businesses with
Page 454
fewer than 15 employees from the Act, was "to spare very small
firms from the potentially crushing expense of mastering the
intricacies of the antidiscrimination laws, establishing
procedures to assure compliance, and defending against suits when
efforts at compliance fail." Ante, at 447 (quotation from
Papa v. Katy Industries, Inc., 166 F. 3d 937, 940 (CA7
1999)). The inquiry the Court endorses to determine the
physician-shareholders' qualification as employees asks whether
they "ac[t] independently and participat[e] in managing the
organization, or . . . [are] subject to the organization's
control." Ante, at 449 (quoting 2 Equal Employment Opportunity
Commission, Compliance Manual § 605:0009 (2000)). Under the
Court's approach, a firm's coverage by the ADA might sometimes
turn on variations in ownership structure unrelated to the
magnitude of the company's business or its capacity for complying
with federal prescriptions.
This case is illustrative. In 1996, Clackamas had 4
physician-shareholders and at least 14 other employees for 28
full weeks; in 1997, it had 4 physician-shareholders and at least
14 other employees for 37 full weeks. App. 55-62; see
42 U.S.C. § 12111(5) (to be covered by the Act, an employer must have the
requisite number of employees "for each working day in each of 20
or more calendar weeks in the current or preceding calendar
year"). Beyond question, the corporation would have been covered
by the ADA had one of the physician-shareholders sold his stake
in the business and become a "mere" employee. Yet such a change
in ownership arrangements would not alter the magnitude of
Clackamas' operation: In both circumstances, the corporation
would have had at least 18 people on site doing the everyday work
of the clinic for the requisite number of weeks.
The Equal Employment Opportunity Commission's approach, which
the Court endorses, it is true, "excludes from protection those
who are most able to control the firm's practices and who, as a
consequence, are least vulnerable to the discriminatory treatment
prohibited by the Act." Brief for
Page 455
United States et al. as Amici Curiae 11; see
42 U.S.C. §§ 12111(8), 12112(a) (only "employees" are protected by the ADA).
As this dispute demonstrates, however, the determination whether
the physician-shareholders are employees of Clackamas affects not
only whether they may sue under the ADA, but also  and of far
greater practical import  whether employees like bookkeeper
Deborah Anne Wells are covered by the Act. Because the character
of the relationship between Clackamas and the doctors supplies no
justification for withholding from clerical worker Wells federal
protection against discrimination in the workplace, I would
affirm the judgment of the Court of Appeals.
Page 456
