Small businesses and the americans with disabilities act
April, 2003
So, you are a shareholder of a small business. You have only ten employees. However, in addition there are six of you that are shareholders and work daily at the Company. Are you covered by the Federal Americans with Disabilities Act ("ADA")? Do you need to jump through all the statutory hoops when your receptionist comes to you and asks for an accommodation for her recently diagnosed carpal tunnel problem?
The ADA applies if a company has 15 or more "employees." In smaller businesses, this number might be reached only if shareholders or partners are also considered "employees." Because more and more professionals -- such as doctors, lawyers, dentists, and lawyers -- are organizing as professional corporations, limited liability companies, or partnerships, the question of whether shareholders or partners are "employees" under the ADA is arising with increasing frequency.
In Clackamas Gastroenterology Associates, P.C. v. Wells (April 22, 2003), the U.S. Supreme Court set forth a test that offers guidance in determining whether the shareholders or partners of a corporation are counted as "employees" for purposes of the ADA.
The theme behind the test is control – is the shareholder or partner subject to the control of others to the degree that the individual is really an employee? The factors to be considered are:
- Can the organization hire or fire the individual or set the rules or regulations for the individual's work?
- To what extent does the organization supervise the individual's work?
- Does the individual report to someone higher in the organization?
- To what extent is the individual able to influence the organization?
- Did the parties intend for the individual to be an employee, as expressed in written contracts or agreements?
- Does the individual share in the profits, losses, and liabilities of the organization?
It is important to remember that the answer to whether the shareholder or partner is an employee or employer cannot be decided by some "magic formula." An individual's title is not determinative of whether that individual is an employee or an employer. An employer is the person, or group of persons, who own or manage the business. The employer has the ability to hire and fire employees and can assign tasks to employees and supervise their performance. The employer can also decide how the profits and losses of the business will be distributed.
Although this federal decision will affect many businesses, state law cannot be ignored. For example, the California analog to the ADA has a threshold of five (5) employees, instead of the federal threshold of fifteen (15) employees. Oregon's law has a threshold of six (6) or more employees. Washington has a threshold of eight (8) or more employees.
If you are a small business, or are thinking of setting one up, and you want to make sure that you are conducting your business in such a way as to meet these tests, be sure to consult your legal counsel.