When executives are offered a shareholder or partner agreement, they want to review the agreement and circumstances surrounding their work to determine whether they are an “employee” of the firm. This review has implications for their future. Individuals who are “employees” are protected under federal and state employment laws. Those who are not employees are not protected under federal and state employment laws and therefore, cannot bring claims of discrimination, harassment, or retaliation under such laws.
This distinction came up in a case of first impression for the 8th Circuit in Van Kaenel v. Armstrong Teasdale, LLP, 943 E3d 1139 (8th Cir. 2019). The 8th Circuit held that the law firm in which Van Kaenel worked as a partner could implement and enforce mandatory retirement requirement at age 70 and the firm’s forced retirement of Van Kaenel was not discriminatory under the Age Discrimination in Employment Act (ADEA) because he was not an “employee.”
The United States Supreme Court in Clackamas Gastroenterology Associates, P.C. v. Wells, 538 U.S. 440 (2003) similarly found that four shareholder-director physicians were not “employees.” As such, the medical clinic in which a bookkeeper with a disability worked and was fired from could not sue the clinic under the Americans with Disabilities Act because the clinic did not have enough “employees” to be subject to the ADA.
Courts look at various factors to determine whether an individual is an “employee” or not. These factors include: (1) whether the organization can hire or fire the individual or set rules and regulations for the individual’s work; (2) whether and to what extent the organization supervises the individual’s work; (3) whether the individual reports to someone higher in the organization; (4) whether and to what extent the individual is able to influence the organization; (5) whether the parties intended the individual to be an employee, as expressed in written contracts or agreements; and (6) whether the individual shares in the profits, losses, and liabilities of the organization.
Courts relying on many of these factors have determined that partners or shareholders with a vested ownership interest and/or authority to manage and control the firm are not “employees” covered under federal anti-discrimination laws.
It is imperative that you not sign any document until you have had the chance to thoroughly review the document and understand its implications.
At Bertelson Law Office, P.A., we offer a thorough review to help you determine how your situation would be impacted by signing, or if it would be appropriate to move forward negotiating changes to the agreement, such as increasing the amount the employer is offering, additional benefits, and/or language changes to the agreement.
Contact Bertelson Law Offices, PA at 612-278-9832 or [email protected] for assistance with your employment contract.