Summary
granting summary judgment on the basis that two physician shareholders in a professional corporation were not to be counted as "employees" for purposes of determining whether the corporation was an employer under the ADEA
Summary of this case from Schmidt v. Ottawa Medical Center, P.C.Opinion
Cause No. IP99-1123-C-H/G
August 23, 2000
Bull; Bobby A. Potters Potters Law Office Indianapolis, IN 46222
Ronald L Cross Boston Bever Klinge Cross Chidester Richmond, IN 47374
ENTRY ON DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
Plaintiff Margaret L. Smith worked for defendant Deitsch and Royer, MD, Inc., as a laboratory technician. The defendant is a professional corporation organized under the Indiana Professional Corporation Act, Indiana Code § 23-1.5-1 et seq. Dr. Howard C. Deitsch and Dr. James P. Royer were the only shareholders, directors, and officers of the defendant corporation during the relevant time period. See Physicians' Aff. ¶¶ 1, 2.
Plaintiff Smith claims that the defendant corporation violated the Americans with Disabilities Act, 42 U.S.C. § 12101 et seq., when it terminated her employment on November 17, 1997. Plaintiff has also asserted a state law claim under the court's supplemental jurisdiction for intentional infliction of emotional distress. The defendant has moved for summary judgment on plaintiff's ADA claim. As explained below, the court grants defendant's motion because the undisputed facts show that defendant was not large enough to be deemed an employer for purposes of ADA. Plaintiff's state law claim for intentional infliction of emotional distress is also dismissed without prejudice as the court relinquishes supplemental jurisdiction over it.
The ADA prohibits a "covered entity" from discriminating against a "qualified individual with a disability because of the disability of such individual" with respect to hiring, firing, promotion, and other terms and conditions of employment. 42 U.S.C. § 12112(a). A "covered entity" is defined as an "employer, employment agency, labor organization, or joint labor-management committee." 42 U.S.C. § 12111(2). An employer is defined as "a person engaged in an industry affecting commerce who has 15 or more employees for each working day in each of 20 or more calendar weeks in the current or preceding calendar year." 42 U.S.C. § 12111(5)(A).
The undisputed facts show here that defendant is entitled to summary judgment on plaintiff's claim because it did not employ the requisite number of employees during the relevant time period to qualify as an employer under the ADA.
Defendant has framed the issue in terms of "jurisdiction," and some Seventh Circuit cases from a few years ago support that approach. The Seventh Circuit's more recent cases, however, consistently hold that the employer's size is simply one element on the merits of the plaintiff's claim, not an aspect of subject matter jurisdiction. Compare, e.g., Papa v. Katy Industries, Inc., 166 F.3d 937, 943 (7th Cir. 1999) (status as covered "employer" not jurisdictional), and Sharpe v. Jefferson Distributing Co., 148 F.3d 676, 678 (7th Cir. 1998) (not jurisdictional), with, e.g., Rogers v. Sugar Tree Products, Inc., 7 F.3d 577, 580 (7th Cir. 1994) (status as covered "employer" treated as "jurisdictional").
Defendant's payroll records show that, in addition to Dr. Deitsch and Dr. Royer themselves, the corporation had 12 or 13 employees in 1996 and 1997. See Ramsey Aff. Exs. A B. During 1996, defendant listed 13 employees in only one two-week pay period. During 1997, defendant listed 13 employees in only four two-week pay periods. According to those records, apart from Dr. Deitsch and Dr. Royer themselves, defendant had no more than 12 employees in each of 20 or more calendar weeks in the two relevant years.
Defendant's count of employees does not include Dr. Deitsch and Dr. Royer as employees, nor does it include two people whom the defendant treated as independent contractors during 1996 and 1997.
To avoid summary judgment on the issue of having at least 15 employees, plaintiff must come forward with evidence that would allow a reasonable trier of fact to find that at least three of those four people should be treated as employees.
First, plaintiff contends that Dr. Deitsch and Dr. Royer should be counted as employees of the corporation. Plaintiff points out that Doctors Deitsch and Royer were paid wages for work performed for the professional corporation and that the corporation paid both federal and state taxes on those wages.
However, in Equal Employment Opportunity Commission v. Dowd Dowd, Ltd., 736 F.2d 1177 (7th Cir. 1984), the Seventh Circuit held that shareholders in a professional corporation engaged in the practice of law were not to be counted as "employees" for purposes of determining whether the corporation was an "employer" under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e(b). The court applied an "economic reality" test and viewed shareholders in professional corporations as analogous to a partner in a partnership. 736 F.2d at 1178. The court explained: "The economic reality of the professional corporation in Illinois is that the management, control, and ownership of the corporation is much like the management, control, and ownership of a partnership." Id. Thus, the court found "no reason to treat the shareholders of a professional corporation differently for purposes of Title VII action" than it had treated the partners of an accounting firm. Id., citing Burke v. Friedman, 556 F.2d 867 (7th Cir. 1977) (finding that partners of an accounting firm were not regarded as employees for purposes of Title VII).
Dowd Dowd concerned the definition of an employee for purposes of a Title VII action. Dowd Dowd still applies to this ADA action, however, because the term "employer" as used in the ADA, "mirrors the definitions of `employer' in Title VII of the Civil Rights Act of 1964 and the Age Discrimination in Employment Act (ADEA)." U.S. Equal Employment Opportunity Commission v. AIC Security Investigations, Ltd., 55 F.3d 1276, 1279-80 (7th Cir. 1995).
Plaintiff points out that the Second Circuit has disagreed with the Seventh Circuit on this issue. In Hyland v. New Haven Radiology Associates, P.C., 794 F.2d 793, 798 (2d Cir. 1986), the court rejected the Seventh Circuit's economic reality test and held that shareholders and principals of a professional corporation were employees of the corporation for purposes of federal employment discrimination laws. The Second Circuit saw no reason to disregard, for the benefit of the principals, the very form of business organization that those same principals chose. See also McQuade v. Draw Tite, Inc., 659 N.E.2d 1016, 1020 (Ind. 1995) (declining to pierce corporate veil to enable both parent and subsidiary to treat injured employee of subsidiary as an employee subject to workers' compensation limits; "we perceive little likelihood that equity will ever require us to pierce the corporate veil to protect the same party that erected it").
This court simply is not free to choose sides in the debate between the Seventh and Second Circuits on this issue. The Seventh Circuit's decision in Dowd Dowd is clear and cannot be distinguished on any meaningful basis. Doctor Deitsch and Doctor Royer therefore cannot be counted as employees under the ADA. However, even if they were both considered employees for these purposes, plaintiff would still fall short of showing a basis for finding the defendant had 15 or more employees for 20 weeks or more in either 1996 or 1997.
Plaintiff asserts that the defendant employed two additional people not included in defendant's payroll records: Luther Hunter, who cleaned the corporate offices, and Donna Roberts, who transcribed the doctors' notes. In support of this assertion, plaintiff relies on the defendant's answer to plaintiff's interrogatory number four. That interrogatory asked defendant to: "Identify the names, position, and dates of employment of all persons who were issued either a W-2 or a 1099 Income Reporting tax form for the year 1997." Pl. Ex. 1. The defendant's response states, in relevant part:
There was no employment relationship with those persons or entities to whom 1099 forms were issued. Those entities, and the services that they provided the Defendant during the year 1997 were as follows:
1. Geo. S. Olive Co., L.L.C. — provided payroll processing and accounting services throughout the year.
2. Luther Hunter — provided office cleaning service throughout the year.
3. Donna Roberts — provided transcription service for doctors and nurses notes throughout the year.
4. Deitsch Royer Associates — landlord of the Defendant to whom office rent was paid throughout the year.
Id.
The interrogatory response is not evidence that Hunter or Roberts worked as the defendant's employee during the relevant time period. In fact, this response supports defendant's contention that Hunter and Roberts were independent contractors and not the defendant's employees. Additionally, the defendant has produced evidence showing that Roberts worked as an independent contractor for the corporation during the relevant time period. See Roberts Aff. ¶¶ 3(E), 4(E).
On a motion for summary judgment, the moving party must first come forward and identify those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, which the party believes demonstrate the absence of a genuine issue of material fact. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Where the moving party has met the threshold burden of supporting the motion, as defendant did here, the opposing party must "set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). Under Local Rule 56.1, the party opposing the motion must identify specific and material factual disputes. The non-moving party "may not rest upon mere allegations in the pleadings or upon conclusory statements in affidavits; [she] must go beyond the pleadings and support [her] contentions with proper documentary evidence." Chemsource, Inc. v. Hub Group, Inc., 106 F.3d 1358, 1361 (7th Cir. 1997); Collier v. Budd Co., 66 F.3d 886, 892 n. 8 (7th Cir. 1995) (evidence must be admissible at trial).
Plaintiff has failed to produce any evidence supporting her claim that Hunter and Roberts were employees of the defendant during the relevant time period. Thus, the undisputed evidence shows that even if Drs. Deitsch and Royer were counted as employees under the ADA, the defendant did not employ 15 or more employees for the requisite 20 weeks. The defendant therefore is not a "covered entity" under the ADA and is entitled to summary judgment on plaintiff's claim. The defendant's motion for summary judgment on plaintiff's ADA claim is GRANTED and plaintiff's state law claim for intentional infliction of emotional distress is dismissed without prejudice as the court relinquishes supplemental jurisdiction over that claim. Final judgment to that effect shall be entered immediately.
So ordered.