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;Clackamas Gastroenterology Assocs., P.C. v. Wells, 538 U.S. 440, 449-50 (2003).
(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.
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.