Clackamas Gastroenterology v. Wells, Deborah (04/22/2003)

Questions presented: Whether a federal court should apply an economic realities test to determine if a medical clinic's physician-shareholders should be counted as "employees" for the purpose of determining if the clinic is a "covered entity" subject to the Americans with Disabilities Act and other federal anti-discrimination statutes.

BY JANE VAUGHN, MEDILL NEWS SERVICE

In February 1997 Deborah Wells found out why she had been tired, weak and troubled by a racing heartbeat. Doctors diagnosed her with mixed connective tissue disorder, an auto-immune disease similar to rheumatoid arthritis.

She made accommodations at her job as a bookkeeper in an Oregon medical clinic, starting earlier in the day, at 7 a.m. and finishing at 4 p.m.

But Wells boss often asked her to fill in for the receptionist, adding to her regular workload, and she told her boss the extra hours were too much.

So on April 25, Wells boss assigned her to work full-time as a receptionist in a different office, about 20 miles farther from Wells home. The new job would shift her hours to later in the day.

Wells objected to the move, telling her employer, "You know I can't do that," said her lawyer, Craig Crispin.

"So you're quitting then?" Wells says her supervisor responded. He repeated the question several times during conversations he had with Wells that April, which failed to reach a compromise.

"It was an effort to get rid of her," Crispin said of the transfer.

As it turned out, Wells never made it to her new job. She faxed a notice from her doctor allowing her to stay home from work until May 12. On May 13, she faxed permission to extend the arrangement.

Wells didnt know that seven days earlier, her employer had mailed her a letter stating she was fired, effective May 13.

Wells, who had worked at the company for more than 10 years, sued her employer, Clackamas Gastroenterology Associates, P.C., under the federal Americans with Disabilities Act of 1990.

But due to a provision in the ADA, Wells never got a chance to present her case of discrimination.

The ADA defines employers as businesses with more than 15 employees. Clackamas, which employed between 16 and 19 people during the time Wells worked there, says four of its staff actually are physician-shareholders, not employees.

Without those four people, Clackamas is exempt from the ADA.

A district court in Oregon agreed with Clackamas, saying the business behaves like a partnership, with the four physicians acting as co-owners rather than employees.

But the 9th Circuit Court of Appeals in San Francisco voted 2-1 to reverse. The court said that granting professional corporations the benefits of a partnership was unfair.

"There is no reason to permit a professional corporation to secure the Ôbest of both possible worlds by allowing it both to assert its corporate status in order to reap the tax and civil liability advantages and to argue that it is like a partnership in order to avoid liability for unlawful employment discrimination," the court wrote.

The dissenting judge argued that the way Clackamas operates on a daily basis, with shareholders managing the employees and sharing profits, should dictate its classification as a partnership.

"Our circuit has cautioned against being governed by labels, rather than realities," Judge Susan Graber wrote.

For those companies on the legal border between large and small, this lawsuit has big implications, said Steven Seymour, the lawyer for Clackamas.

"Professional corporations between 15 and 19 employees are likely to find themselves caught in the gray zone between small and large employer categories," Seymour said in a brief.

Crispin agreed, pointing to the wide use of staff size as a determining factor in civil rights legislation.

"Almost any statute that has [a size] requirement will be affected" by the outcome of this case, he said. He noted that Title VII, which prohibits discrimination based on race, religion, sex and nationality, has the same employee requirement as the ADA.

Congress put the provision in place to protect small businesses that likely could not afford lawsuits brought by employees claiming discrimination.

Wells, now 42, works as a bookkeeper at a much larger medical company.

Auto-immune diseases affect about 50 million Americans, mostly women. In addition to fatigue and weakness, symptoms include joint and muscle pain and digestive problems.

On Oct. 1, 2002, as the U.S. Supreme Court's 2002-03 term was less than a week away, the Court granted certiorari in the case and added it to its docket.

On April 22, 2003, the Court reversed, holding 7-2 to remand the case for a decision on who really controls the clinic.

The reason control is critical, though hard to determine, the majority noted, is that professional corporations are relatively recent phenomena and differ from state to state.

Writing for the majority, Justice John Paul Stevens looked to the common law to conclude how control of a firm is to be dictated. Conceding that although the professional corporation may have no exact common-law precedent, the basic master-servant relationship, which the EEOC used as guidance, is a useful touchstone.

However, the Court remanded the case so that the trial court could review under that theory.

Justice Ruth Bader Ginsburg wrote a dissent for herself and Justice Stephen Breyer. Their objection was that they saw "no cause to shelter Clackamas from the governance of the ADA."

In conclusion, Ginsburg argued that Wells should be given protection under the ADA because "the character of the relationship between Clackamas and the doctors supplies no justification for withholding from clerical worker Wells federal protection against discrimination in the workplace."