Friday, July 16, 2010

Law Firm Shareholder Not an "Employee" in 3rd Circuit

Yesterday, the Third Circuit held that a shareholder (or partner) in a law firm is an employer, not an employee. Kirleis v. Dickie, McCamey, and Chilcote, No. 09-4498 (July 15, 2010 3d Cir.). Why does this matter? As an employer, she is "precluded from bringing claims under the employment anti-discrimination laws." At issue in this case: Title VII, Equal Pay Act, and PHRA.

In an extremely brief analysis, the Third Circuit applied the six factors for determining whether a shareholder is an employer or employee from the U.S. Supreme Court:
(1) whether the organization can hire or fire the individual or set the rules and regulations of the individual's work;
(2) whether and, if so, to what extent the organization supervises the individual's work;
(3) whether the individual reports to someone higher in the organization;
(4) whether and, if so, to what extent the individual is able to influence the organization;
(5) whether the parties intended that the individual be an employee, as expressed in written agreements or contracts; [and]
(6) whether the individual shares in the profits, losses, and liabilities of the organization.
Clackamas Gastroenterology Assocs., P.C. v. Wells, 538 U.S. 440, 449-50 (2003).

If you're curious which facts were most compelling to the Third Circuit:
As a Class A Shareholder-Director of DMC, Kirleis has the ability to participate in DMC's governance, the right not to be terminated without a 3/4 vote of the Board of Directors for cause, and the entitlement to a percentage of DMC's profits, losses, and liabilities.
The Third Circuit affirmed the District Court's grant of summary judgment in favor of the law firm.

Posted by Philip Miles, an employment lawyer with McQuaide Blasko in State College, Pennsylvania.