If yours is a business engaged in professional practices like law, medicine or accounting, your organization may have partners or shareholders who receive paychecks. Know that such shareholders probably can’t sue for discriminatory practices under Title VII and other anti-discrimination and employment laws.
Courts have created a test that measures whether a shareholder exerts enough control over the business to be considered an employer rather than an employee. The test looks at six factors, including whether:
- The organization can hire or fire the individual or regulate her work.
- The individual is closely supervised.
- She reports to someone higher.
- She is able to make decisions for the organization.
- The parties intended for the individual to be an employee.
- She shares in the organization’s profits, losses and liabilities.
In other words, the more control the organization has over the individual, the more likely she is an employee.
Recent case: Attorney Alyson Kirleis worked for the same law firm for over 20 years and had been a partner for eight years. Kirleis, apparently believing that she was not earning as much as her male counterparts, sued the firm for sex discrimination.
The firm argued that Kirleis couldn’t sue because she was an employer, not an employee. It pointed out that Kirleis had the right to share in profits and had a right to vote on law firm matters. She was also not closely supervised.
The court said she was not an employee and tossed out the case. (Kirleis v. Dickie, McCamey & Chilcoat, PC, No. 09-4498, 3rd Cir., 2010)
Final note: Several national women’s rights groups backed Kirleis’ lawsuit. No word yet on whether it will be appealed to the U.S. Supreme Court.
- How to Fire an Employee the Legal Way: 6 Termination Guidelines
- Last-chance agreement can head off discrimination suit
- Spaghetti incident gets even messier in LAFD's tangled tale
- Without 'ultimate employment action,' it's hard to make discrimination claims stick
- Get expert legal advice to make sure arbitration agreements are valid and enforceable