Case Law Alerts
An officer and director of a closely held corporation was not an "employee" for purposes of Title VII and was, therefore, precluded from bringing a religious discrimination claim against the company.
The plaintiff filed a religious discrimination lawsuit, alleging he was harassed and terminated by a company that was initially founded by his father after the plaintiff had a "spiritual awakening" fourteen years prior to his termination. Specifically, the company was founded by the plaintiff's father in 1947, and the plaintiff and his brothers joined the business in the 1960s. The plaintiff was a vice-president and secretary of the company and was also a member of its board of directors. The plaintiff alleged that he delivered the eulogy at his father's funeral and commented on his own faith. Two days following the funeral, he received written notice that the shareholders had voted to terminate his employment, effective immediately. The plaintiff was advised, however, that his "share of any draws from the corporation or other entities will continue to be distributed to [him]." Further, the plaintiff remained a member of the board of directors for another eight months, when the shareholders did not re-elect him to the board of directors.
In rejecting the plaintiff's claim of religious discrimination, the Third Circuit held that the plaintiff was not an "employee" of the corporation. In so holding, the Third Circuit relied heavily on the Supreme Court's decision in Clackamas Gastroenterology Associates, P.C. v. Wells, 538 U.S. 440 (2003), which previously outlined six factors that were relevant to determine whether a shareholder-director was an employee of public corporation pursuant to the Americans with Disabilities Act. Specifically, the factors included (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.
Moreover, the Third Circuit expressly rejected the plaintiff's arguments that Clackamas should not be applied in his case because (a) it was not an ADA case and (b) it did not involve a professional corporation. Specifically, the Third Circuit noted that the definition of "employee" was the same in the ADA as it was in Title VII and, that the nature of the business entity is simply an attribute of the employment relationship that must be considered in applying the Clackamas test to determine whether an individual is an employee or an employer. In applying the test to plaintiff's situation, the Third Circuit found it notable that the plaintiff continued to receive draws from the company after his alleged termination and that he also remained a member of the board of directors for several months. As a result, the Third Circuit expressly noted that the plaintiff "fails to allege that he is the kind of person that the common law would consider an employee" and upheld the dismissal of his religious discrimination claim.
Case Law Alert, 3rd Quarter 2013