There are many New York and federal laws designed to protect employees against various types of discrimination. All of these laws are predicated on the fact that an employer-employee relationship exists in the first place. There are many cases where it is not obvious that a plaintiff is, in fact, an employee (or former employee) of the defendant.
The Supreme Court's Six Factors
This often comes up when dealing with employers purportedly structured as “partnerships,” such as a law or medical practice. Individual employees may be titled as “partners.” Does simply giving someone a title that implies ownership automatically deny them protection under employment discrimination laws?
The answer is no, at least according to the United States Supreme Court. In a 2003 decision, the Court said there were six factors that judges needed to consider when deciding if an individual who is classified as a partner, shareholder, or director, is really an employee:
- Could the employer “hire or fire the individual or set the rules and regulations of the individual's work”?
- Could the employer “supervise the individual's work,” and if so, to what extent did he or she actually provide supervision?
- Did the individual report “to someone higher in the organization”?
- Could the individual “influence the organization,” and to what extent did he or she actually do so?
- Did the parties intend for the individual to be an employee “as expressed in written agreements or contracts”?
- Did the individual share in the “profits, losses, and liabilities” of the employer?
These factors are not exclusive. That is to say, the answer to no one question dictates the outcome. According to the U.S. Second Circuit Court of Appeals, whose decisions bind federal courts in New York, a judge must make a “fact-intensive inquiry” into all six factors and base their final decision on “economic reality rather than technical concepts.”
For example, a federal judge in Manhattan is currently presiding over a gender discrimination lawsuit against a well-known law firm and several of its partners. The defendants moved to dismiss on the grounds based on the “plaintiffs' status as partners at the Firm” and the “terms of the operative partnership agreement.” The judge denied the motion for now and ruled that further discovery is necessary to resolve this issue.The judge said that there was already some evidence in the record that suggested the “partners” could be classified as employees under the factors specified by the Supreme Court. For instance, the plaintiffs allege that decisions regarding the hiring, firing, and status of partners are really made by a “sub-committee of partners” with “unilateral control,” not the partners as a group. The plaintiffs further allege that a “management committee” controls the distribution of profits, as well as each “individual partner's degree of control” and autonomy within the