When Are Shareholders Also Employees? (Disney-Themed Version)

When are shareholders considered employees

I have always believed that in the song made famous by Happy, Dopey, Sneezy and friends, they were saying “Off to work we go,” but I just checked a few sites for lyrics and the lyrics all show the dwarves singing, “It’s home from work we go.” Can this be true? Have I been mixed up all these years about which way the dwarves were going to dig dig dig with a shovel or a pick?

Work can be confusing. A non-cartoon-dwarf scenario that can be confusing is trying to determine whether shareholders in a business are also employees of that business. In today’s post, we examine that question by celebrating the 15th anniversary of a 2003 Supreme Court case. (Happy Anniversary, case! 🎂)

Like many tests for determining Who Is My Employee?, this one comes down to control and the familiar Right to Control Test.

In Clackamas Gastroenterology Associates, P. C. v. Wells, an employee of this Oregon-based medical clinic tried to sue for disability discrimination under the federal Americans with Disabilities Act (ADA). To bring claim under the ADA, though, the plaintiff must show that her employer has 15 or more employees.

The clinic had four owner/shareholders who were also physicians. If they were also employees, then the clinic had 15 employees and Ms. Wells could pursue her ADA lawsuit. If these physicians were just shareholders and not employees, then the clinic had fewer than 15, and Ms. Wells would be SOL.

The dispute made its way to the U.S. Supreme Court. The Court ruled that the proper way to determine whether the physician/shareholders counted as employees was to apply a Right to Control Test. But which version?

The standard Right to Control Test tries to distinguish between an employee and an independent contractor. Because the question here is a bit different, the test had to be adapted to fit the situation.

The Court decided that these six factors were most important for deciding whether the physician/shareholders were also employees:

1. Whether the organization can hire or fire the individual or set the rules and regulations of the individual’s work;
2. Whether and, if so, to what extent the organization supervises the individual’s work;
3. Whether the individual reports to someone higher in the organization;
4. Whether and, if so, to what extent the individual is able to influence the organization;
5. Whether the parties intended that the individual be an employee, as expressed in written agreements or contracts; and
6. Whether the individual shares in the profits, losses, and liabilities of the organization.

Like the traditional Right to Control Test, this is a balancing test. Some factors may weigh in one direction, some may tilt the other way. Ultimately, a judge (or jury) needs to weigh the factors and make a determination.

In this case, the Supreme Court did not do the weighing. Instead, it articulated the test and sent the case back to the Oregon district court to weigh the factors.

So for Ms. Wells, the case left the Supreme Court and went back to the federal court in Oregon. And so the real question is: For Ms. Wells after the Supreme Court’s ruling, was it “off to court we go” (headed back to Oregon) or “home from court we go” (leaving D.C.)? I bet she never thought about that.

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Can Independent Contractors Sue for Employment Discrimination?

diaper independent contractor discrimination

The answer brings to mind the one must-have item for the thousands of crazies who spend 12 hours in Times Square waiting for the ball to drop every New Years’ Eve with no available public restrooms:

Depends.

Under federal anti-discrimination law, an individual generally needs to be an employee to bring an employment discrimination claim. Laws like the Age Discrimination in Employment Act (ADEA) and Title VII of the 1964 Civil Rights Act require employment status to file a lawsuit. Race discrimination claims, on the other hand, can potentially be brought under a different statute.

State laws, however, vary. Some states permit independent contractors to bring “employment discrimination” lawsuits; other states do not.

A recent decision by the Washington Supreme Court serves as a reminder that in the Great Northwest (home of Mount St. Helens and Blaine Peace Arch Park [which I visited  last month and got to run around and around the obselisk that marked the international border]), an independent contractor can bring a state law claim for discrimination “for the making or performance of a contract for personal services.”

The Pennsylvania Human Relations Act also prohibits discrimination against independent contractors.

On the flip side, state anti-discrimination laws in Ohio and Florida protect only employees, not independent contractors.

To determine whether independent contractors are protected under anti-discrimination laws, the answer truly is: It depends.  It depends on the type of alleged discrimination and depends on the state whether the alleged discrimination occurred.

None of this is to say that companies in states like Ohio or Florida should discriminate against contractors. In fact, where facts of any individual case are particularly egregious, common law claims might be recognized by courts uncomfortable with the idea that there is no remedy, even if the state’s anti-discrimination statute does not permit the claim. Although I live on the defense side, I still say: Do the right thing.

And if you should ever find yourself in Times Square on New Years’ Eve, passing the hours until the ball drops, I say this: Bring your adult undergarments. There’s no place to pee.

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Why You Should Limit Workplace Rules That Apply to Contractors (Twisted Sister Edition)

There are so many great songs about defying authority. What’s the best? Hard to say. The best video, though – that’s easy. We’re Not Gonna Take It by Twisted Sister. (Watch here, then thank me later. I could watch the first minute a hundred times. Say it with me: “What do you want to do with your life?”)

Rock may about breaking rules, but business is not. With your employees, there are lots of rules you want them to follow, and you probably list them in painful detail in handbooks, posters, flyers, brochures, catalogs, signposts, compendiums, directories, and mandatory worker inner eyelid tattoos.

What about independent contractors, though? To preserve independent contractor status, you already know you want to try to minimize your exercise of control. But some rules are needed, expecially for contractors who work on your site.

Here are some guidelines to consider:

Rules appropriate for employees, but not well-suited for contractors: Continue reading

What Role Does the EEOC Play in Independent Contractor Misclassification?

IMG_1081The EEOC’s jurisdiction is limited to claims brought under certain federal anti-discrimination laws. The reach of these laws, however, is limited to employees. It is not a violation of Title VII, for example, to discriminate against an independent contractor.

So the EEOC has nothing to do with issues of independent contracor misclassification, right? Wrong.

Continue reading