Friday, May 3, 2013

3d. Circuit: Shareholder Not "Employee" Under Title VII - COTW #141

Earlier this week, the Third Circuit issued its opinion in Mariotti v. Mariotti Building Products, Inc., holding that a shareholder was not an "employee" under Title VII.

The plaintiff was a shareholder-director in the family business. One day, he had a "spiritual awakening" that was not well received by his family members and fellow shareholders. They began to harass him about his newfound spiritualism (the opinion doesn't really go into what religious beliefs he discovered). The breaking point was Plaintiff's eulogy at Babe Mariotti's funeral that included references to the new religion (Babe was the founder of the business).

So, the shareholders fired their own family member and he filed a discrimination lawsuit. Can a shareholder file a Title VII claim?

In Clackamas Gastroenterology Associates, P.C. v. Wells, 538 U.S. 440 (2003), the Supreme Court adopted the EEOC's six-part test for determining who is an "employee":
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
6. Whether the individual shares in the profits, losses, and liabilities of the organization.
The Third Circuit applied that test here, with a focus on the element of control to conclude that Plaintiff was not an "employee" and the District Court properly dismissed his case.

This case was not just a repeat of the Supreme Court case, and the Third Circuit addressed some of the differences. For example, this was a Title VII case and Clackamas was an ADA case, and this case dealt with a non-professional corporation. Also, this case dealt with whether Plaintiff was an employee for purposes of filing a lawsuit and not whether an individual was an employee for purposes of meeting the employee-threshold to determine whether the employer was covered. Ultimately, none of these differences changed the outcome.

This opinion is likely no surprise to those of you who remember Kirleis v. Dickie, McCamey, and Chilcote (Third Circuit holding that a law firm shareholder was not an employee). However, Mariotti is a precedential opinion and Kirleis was not.