Deborah Wells was employed by Clackamas Gastroenterology Associates, a medical clinic and professional corporation with four physician shareholders and directors and another 12 to 15 employees. When Wells was terminated, she sued Clackamas under the Americans with Disabilities Act. The clinic responded that it didn’t have enough employees to be covered by the ADA.
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Who Is An Employee?
The ADA applies to employers with 15 or more employees for at least 20 weeks in the current or previous calendar year. The law doesn’t specify whether a partner or a shareholder qualifies as an employee. However, under other federal employment discrimination laws, partners in a partnership are typically not counted as employees. Corporate shareholders, however, may qualify as employees if they are involved in managing or operating the business.
The clinic argued that because the four doctor-shareholders in the professional corporation were really like partners in a partnership, they weren’t employees for ADA purposes. If the physician-shareholders weren’t counted, the number of employees during the relevant period fell below the ADA coverage threshold.
Court Says Shareholders Are Employees
But the Ninth Circuit Court of Appeals, which covers California, ruled that the physician-shareholders were employees, and therefore the ADA covered the clinic. The court noted that shareholders in a corporation can never be partners—the roles are mutually exclusive.
What’s more, in this case, the physician-shareholders actively participated in managing and operating the medical practice. And each physician had an employment agreement with Clackamas stating that they were employees.
Evaluating Coverage
This case points out that small employers that have officers, shareholders or directors who are also working managers of the business may need to count these workers as employees for purposes of federal employment discrimination laws. Note, too, that California’s Fair Employment and Housing Act, which prohibits discrimination in employment based on disabilities, applies if you have just five or more employees.