South-Western Legal Studies in Business

Agency Rules Govern Employment Relationships Under Discrimination Laws
Description The Supreme Court held that common-law agency principles of employment relationships will be used to define employment in employment discrimination cases. Since the discrimination statutes do not define who is an employee, the courts will look to the common law for guidance.
Topic Agency
Key Words Employees; Discrimination; Common Law
C A S E   S U M M A R Y
Facts Wells sued a medical clinic contending that it violated the Americans with Disabilities Act when it terminated her employment. The district court dismissed her case because the clinic was not covered by the Act as it did not have 15 or more employees for the 20 weeks required by the ADA. The key issue was whether four physician-shareholders who own the clinic, and are its board of directors, are counted as employees, in which case there would be 15 employees. In that case, the law would apply. The court of appeals held that the physicians were to be counted as employees; the clinic appealed.

Reversed. The employment discrimination statutes do not define employee, so the Court presumes “that Congress intended to describe the conventional master-servant relationship as understood by common-law agency doctrine.” In this particular case, the issue is whether a shareholder-director is an employee. There are six factors relevant to make such a determination: 1) whether the organization can hire or fire the individual or set the rules 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 agreements; and 6) whether the individual shares in the profits, losses and liabilities of the organization.

Citation Clackamas Gastroenterology Assoc., P.C. v. Wells, 2003 WL 1906297 (Sup. Ct., 2003)

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