Case Law Alerts
The Third Circuit holds that a shareholder-director of a law firm is an employer at the law firm and was, therefore, precluded from bringing a Title VII claim as a matter of law.
The plaintiff filed an employment discrimination lawsuit, alleging that she was paid less than her male counterparts, in violation of Title VII, the Equal Pay Act and the Pennsylvania Human Relations Act. The plaintiff worked at a law firm for over twenty years and had been a Class A Shareholder-Director of the law firm for the last eight years. After she filed her employment discrimination claims, the law firm moved for—and was granted—summary judgment, arguing that the plaintiff was not an employee of the law firm but, rather, an employer at the law firm. On appeal, the Third Circuit noted that they examined six factors to determine whether a shareholder-director of a professional corporation is an employer or 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; [and] (6) whether the individual shares in the profits, losses, and liabilities of the organization." The plaintiff argued that she did not meet the definition of an employer under this standard, stating that her position on the Board of Directors was a "rubber-stamp" function and that the Executive Committee set billable rate, made compensation decisions and supervised her work regarding the firm's largest client. The Third Circuit, however, rejected her arguments and determined that she was an employer at the firm and was, therefore, precluded from bringing claim under the employment anti-discrimination laws. In so holding, the court noted that she had the ability to participate in the governance of the organization and had the right not to be terminated without a 3/4 vote of the Board of Directors for cause.
Case Law Alert - 4th Qtr 2010