The blog has previously posted about law firms being sued for age discrimination due to mandatory retirement policies. Senior partners of larger firms started complaining that they weren't ready to retire and wanted to keep their equity and status. The Equal Employment Opportunity Commission even brought suit in one landmark case out of Chicago. And several law firms have changed their mandatory retirement policies in light of the Sidley experience. The emerging generally accepted legal theory was that law firm partners act and are treated more like employees than "owners" of the business, and as a result of the de facto status as employees, they were covered by state and federal anti-discrimination statutes.
Just when the debate seemed over, the Philadelphia-based Third Circuit Court of Appeals ruled that a female shareholder in a large, Pittsburgh-based law firm is not an "employee" for purposes of Title VII because, among other reasons, she could not be removed as a shareholder absent a 3/4 vote of the other shareholders. The terse opinion, which was deemed "non-precedential" by the court, affirmed summary judgment.
But the case highlights the complex, fact-intensive question of whether a shareholder can be treated as an employee. To determine whether a shareholder-director of a professional corporation is an employer or an employee entitled to invoke the anti-discrimination laws, the court looks at six factors: (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 court ruled as a matter of law that given these six factors, no reasonable juror could rule in the female shareholder's favor on the threshold issue of her status as an employee.
The short and non-binding opinion is here:
This begs the question, what rights does a female shareholder have against being ousted due to her gender? The answer, for all intensive purposes, is none. (A different federal civil rights statute would protect a black shareholder from being ousted due to his race, but that statute does not apply to gender based contractual decisions).
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