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Supreme Court: Fewer small firms covered by ADA, but check state law

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in Discrimination and Harassment,Human Resources

It's clear that companies with fewer than 15 employees aren't required to comply with the Americans with Disabilities Act (ADA). But do company shareholders and owners count toward that threshold?

The U.S. Supreme Court weighed in on that issue recently, ruling that four director-shareholder physicians should not be counted as employees. But the ruling wasn't clear-cut. It said that companies must examine how much control such partners exert over the business and how much control the business exerts over them. The more control wielded, the more likely they'll be regarded as true partners (not employees). Specifically, the court said these six factors should be considered when reviewing the element of control:

1. Whether the organization can hire or fire the person or set the rules and regulations of the person's work.

2. Whether and to what extent the organization supervises the person's work.

3. Whether the person reports to someone higher up.

4. Whether and to what extent the person can influence the organization.

5. Whether the parties intended that the person be an employee, as expressed in written agreements or contracts.

6. Whether the person shares in the organization's profits, losses and liabilities.

The case: A bookkeeper with a medical clinic claimed she was fired because of her disability. The clinic countered that it was not covered under ADA because it employed only 14 people. The bookkeeper argued that the four physician shareholders who formed the corporation and made up its board of directors were "employees," thus pushing them over the 15-employee compliance threshold.

The Supreme Court said the question of whether a member of a professional corporation is an "employee" or "owner" turns on the issue of control. Mere titles don't answer the question. The answer depends on the total relationship, focusing on the six factors above. (Clackamas Gastroenterology Associates, P.C. v. Wells, No. 01-1435)

Key point: If you fall under the 15-employee limit, don't grow complacent. Several states and municipalities retain their own disability discrimination laws with employee thresholds lower than 15.

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