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Clackamas Gastroenterology Assocs., P.C. v. Wells

Supreme Court of the United States

February 25, 2003, Argued ; April 22, 2003, Decided

No. 01-1435.


 [***621]   [**1676]   [*441]  JUSTICE STEVENS delivered the opinion of the Court.

 ] The Americans with Disabilities Act of 1990 (ADA or Act),  [****4]  104 Stat. 327, as amended, 42 U.S.C. § 12101 et seq., like other federal antidiscrimination legislation, 1 is inapplicable to very small businesses. Under the ADA an "employer"  [*442]  is not covered unless its workforce includes "15 or more employees for each working day in each of 20 or more calendar weeks in the current or preceding calendar year." § 12111(5). The question in this case is whether four physicians actively engaged in medical practice as shareholders and directors of a professional corporation should be counted as "employees."

Petitioner, Clackamas Gastroenterology Associates, P. C., is a medical clinic in Oregon. It employed respondent, Deborah Anne [****5]  Wells, as a bookkeeper from 1986 until 1997. After her termination, she brought this action against the clinic alleging unlawful discrimination on the basis of disability under Title I of the ADA. Petitioner denied that it was covered by the Act and moved for summary judgment, asserting that it did not have 15 or more employees  [***622]  for the 20 weeks required by the statute. It is undisputed that the accuracy of that assertion depends on whether the four physician-shareholders who own the professional corporation and constitute its board of directors are counted as employees.

 The District Court, adopting the Magistrate Judge's findings and recommendation, granted the motion. Relying on an "economic realities" test adopted by the Seventh Circuit in  EEOC v. Dowd & Dowd, Ltd., 736 F.2d 1177, 1178 (1984), the District Court concluded that the four doctors were "more analogous to partners in a partnership than to shareholders in a general corporation" and therefore were "not employees for purposes of the federal antidiscrimination laws." App. 89.

A divided panel of the Court of Appeals for the Ninth Circuit reversed. Noting that the Second Circuit had rejected the economic [****6]  realities approach, the majority held that the use of any corporation, including a professional corporation, "'precludes any examination designed to determine whether the entity is in fact a partnership.'"  271 F.3d 903, 905  [*443]  (2001) (quoting  Hyland v. New Haven Radiology Associates, P. C., 794 F.2d 793, 798 (CA2 1986)). It saw "no reason to permit a professional corporation to secure the 'best 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."  271 F.3d at 905. The dissenting judge stressed the differences between an Oregon physicians' professional corporation and an ordinary business corporation, 2 and argued that Congress'  [*444]   [**1677]  reasons for exempting small employers from the coverage of the Act should apply to  [***623]  petitioner.  Id., at 906-909 (opinion of Graber, J.).

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538 U.S. 440 *; 123 S. Ct. 1673 **; 155 L. Ed. 2d 615 ***; 2003 U.S. LEXIS 3240 ****; 71 U.S.L.W. 4293; 14 Am. Disabilities Cas. (BNA) 289; 2003 Cal. Daily Op. Service 3357; 2003 Daily Journal DAR 4227; 16 Fla. L. Weekly Fed. S 229


Subsequent History:  [****1]  

On remand at, Remanded by Wells v. Clackamas Gastroenterology Omp Assocs., P.C., 332 F.3d 1177, 2003 U.S. App. LEXIS 11702 (9th Cir., June 13, 2003)


Wells v. Clackamas Gastroenterology Assocs., P.C., 271 F.3d 903, 2001 U.S. App. LEXIS 25126 (9th Cir. Or., 2001)

Disposition: Reversed and remanded.


physician-shareholders, shareholder-director, Compliance, shareholders, servant, common-law, clinic, antidiscrimination, partnership, master-servant

Business & Corporate Compliance, Disability Discrimination, Scope & Definitions, Covered Entities, Labor & Employment Law, General Overview, Employment Relationships, At Will Employment, Definition of Employees, Business & Corporate Law, Agents Distinguished, Independent Contractors, Masters & Servants, Masters & Servants, Governments, Courts, Common Law, Legislation, Interpretation, Independent Contractors, Agency Relationships, Establishment, Elements, General Partnerships, Management Duties & Liabilities, Wrongful Termination, Breach of Contract, Employer Handbooks, Express Contracts, Administrative Law, Judicial Review, Standards of Review, Definition of Employers