Clackamas Gastroenterology Associates v. Wells, 538 US 440 (2003)

Facts: Wells, a bookkeeper for eleven years at Clackamas Gastroenterology Associates, brought an action under the ADA for unlawful discrimination on the basis of disability. Clackamas moved for summary judgment on the basis that it did not have 15 employees which is required for the ADA to apply. Clackamas is a professional corporation which has 14 employees. In addition to the 14 employees, however, Clackamas is owned by four physicians who are actively engaged in the medical practice.

Issue: Whether the four physician shareholders and directors of Clackamas, who are actively engaged in medical practice, should be counted as “employees” under the ADA.

Procedural History: The district court applied the economic realities test and concluded that the four doctors were not employees for purposes of the ADA. The Ninth Circuit Court of Appeals reversed because it saw “no reason to permit a professional corporation to secure the best of both possible worlds.”

Holding: The trial court must apply the common-law tests, specifically the element of control, to determine whether the physicians are employees or the employer.

Judgment: Reversed and remanded to the district court.

Reasoning: Because Congress did not “helpfully define” the term employee, the Court believed that “Congress intended to describe the conventional master-servant relationship as understood by common law agency doctrine.” Therefore, the majority looked to the Restatement (Second) of Agency and six (non-exhaustive) similar factors submitted by the EEOC. The court focused on the factor of control stating, “We think that the common-law element of control is the principal guidepost that should be followed in this case.” Under this factor, the physicians appear not to be employees of the clinic. For example, the physicians apparently control the operation, share the profits, and are personally liable for malpractice claims.

Ginsburg’s Dissent: Ginsburg did not agree with the Court’s placement of “overriding significance” on the one factor of control. In addition, the same physicians had defined themselves as “employees” under ERISA; which defined employee the same way as the ADA. (But see Yates v. Hendon). Furthermore, the physicians are covered by Oregon’s workers’ compensation law. Ginsburg concluded that Clackmas, the professional corporation, is the employer and the physicians are employees of the corporation. This conclusion came from the fact that the professional corporation was created in order to limit the physicians’ liability for the debts of the practice and that the physicians had to adhere to the corporation’s policies and procedures.

Compare to Yates v. Hendon, 541 US 1 (2004) which the Supreme Court decides the next term.

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