If your business is a professional practice like law, medicine or accounting, it may have partners or shareholders who receive paychecks.
Such shareholders probably can’t sue for discriminatory practices under Title VII and other employment laws. But when is a person considered a shareholder or partner?
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 his or her work.
- The individual is closely supervised.
- He reports to someone higher.
- He is able to make decisions for the organization.
- The parties intended for the person to be an employee.
- He shares in the organization’s profits, losses and liabilities.
In other words, the more control the organization has over the person, the more likely he or she is an employee.
Recent case: Attorney Alyson Kirleis worked for the same law firm for more than 20 years and had been a partner for eight years. Kirleis believed she wasn’t earning as much as her male counterparts, so she sued 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 agreed she was not an employee and tossed out the case. (Kirleis v. Dickie, McCamey & Chilcote, 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.