Clackamas Gastroenterology Associates, P. C. v. Wells
The Supreme Court ruled that whether physician-shareholders of a professional corporation count as employees under the Americans with Disabilities Act depends on how much control the organization has over them, not on whether they resemble partners in a partnership or hold shareholder titles.
The Court sent the case back to the lower court to apply a six-factor control test, because the answer determines whether the clinic has enough employees to be covered by the ADA at all — which in turn decides whether a bookkeeper fired by the clinic can sue for disability discrimination.
“We think that the common-law element of control is the principal guidepost that should be followed in this case.”
The Court's core holding on how to decide whether shareholder-directors count as employees.
How it got here: A federal district court granted summary judgment for the clinic; the Ninth Circuit reversed; the Supreme Court granted certiorari to resolve a circuit split.
The Case in Depth
What happened
A medical clinic in Oregon, organized as a professional corporation owned by four physician-shareholders who also served as its board of directors, fired its longtime bookkeeper. She sued under the ADA, alleging disability discrimination. The clinic argued it was too small to be covered because it didn't have 15 employees unless the four physicians were counted, and it claimed they were more like partners than employees.
The question before the Court
When a small medical clinic is organized as a professional corporation, do the physician-owners who also serve as directors count as "employees" for figuring out whether the business is big enough to be covered by federal disability discrimination law?
The Court's answer
Partly — the Court didn't give a yes-or-no answer for this specific clinic, but it set the legal rule for answering the question. It ruled that physician-shareholders count as employees (rather than proprietors) based on how much real control the organization has over them, using a six-factor test: who can hire and fire them, who supervises their work, whether they report to someone else, how much influence they have over the organization, what any written agreements say, and whether they share in profits and losses.
The Court rejected the idea that looking like a "partner" or holding a corporate title settles the question. Because the record contained some evidence pointing each way, the Court sent the case back to the lower court to apply this control test and determine whether the clinic actually has enough employees to be covered by the ADA.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
Small businesses organized as professional corporations — common among doctors, lawyers, and other licensed professionals — now must analyze how much real control owner-directors have over the business, not just their formal titles, to know if they clear the 15-employee threshold that triggers federal antidiscrimination coverage for their staff.
What changes now
The case returns to the Ninth Circuit to apply the Court's six-factor control test to the existing record and decide whether the four physician-shareholders count as employees. If they don't count, the clinic falls below the 15-employee threshold and is not covered by the ADA, meaning the bookkeeper's discrimination suit could not proceed. The ruling is a final decision on the legal standard, not a final resolution of the underlying discrimination claim.
What this does not decide
The Court did not decide whether the physician-shareholders in this specific clinic actually count as employees — it sent that fact-specific question back to the lower court to apply the control test. It also did not resolve the broader question for every professional corporation, since the answer depends on each organization's particular facts.
Concurrences and dissents
Dissent — Justice Ginsburg
“There is nothing inherently inconsistent between the coexistence of a proprietary and an employment relationship.”The dissent's opening point that owning a stake in a business doesn't rule out also being an employee.
Justice Ginsburg argued the majority wrongly elevated control above other common-law factors, when courts should weigh all indicia of an employment relationship together. She emphasized that the doctors had employment contracts, received salaries, worked under clinic-imposed standards, and were treated as employees under ERISA and Oregon workers' compensation law. She warned the majority's approach lets ADA coverage turn on arbitrary ownership structure rather than the clinic's actual size and capacity to comply with the law, and would have affirmed coverage to protect the fired bookkeeper.
How the Court got there
The legal reasoning, step by step
- The Court noted that the ADA's definition of 'employee' — 'an individual employed by an employer' — is circular and gives no real guidance, so as in past cases interpreting similarly vague federal statutes, the Court looked to common-law agency principles to fill the gap.
- The Court rejected the clinic's proposed 'partner' test, reasoning that modern partnerships can include many people who function as employees, so asking whether someone looks like a partner rather than whether they are controlled by the organization just avoids the real question.
- The Court also rejected the Ninth Circuit's approach of treating any incorporated entity as automatically excluding a partnership-like analysis, since that approach ignored the practical realities of a professional corporation's structure.
- Following the common-law 'master-servant' framework — which asks who has the right to control the work — the Court adopted the EEOC's six-factor control test, asking whether the organization can hire or fire the person, supervises their work, requires them to report to someone else, lets them influence the organization, treats them as an employee in written agreements, and shares profits and losses with them.
- The Court explained that no single factor is decisive and titles like 'director' or 'shareholder' do not by themselves resolve whether someone is an employee; what matters is the actual balance of control within the organization.
- Applying this framework to the record, the Court found some findings suggesting the physicians controlled the clinic, shared profits, and bore personal liability — pointing toward non-employee status — but concluded the record needed further review under the newly clarified standard.
Doctrinal impact
Cases affected by this decision
Reaffirms Nationwide Mut. Ins. Co. v. Darden (503 U.S. 318)
The Court relied on Darden's approach of using common-law agency principles to define circular statutory terms like 'employee.'
Reaffirms Community for Creative Non-Violence v. Reid (490 U.S. 730)
The Court cited Reid as prior precedent supporting use of common-law tests to define 'employee' in federal statutes.